Corporate Governance in China—Is Economic Growth Potential Hindered by Guanxi?

Abstract

Despite the opening of the market and partial privatization of stateowned companies in China, the state still represents the controlling shareholder in larger companies. By analyzing the weaknesses of Chinese corporate governance we illustrate the framework for harmful corruption. China is characterized by a weak legal system and strong influences of traditions such as guanxi . In this article we analyze the influence of guanxi on the Chinese corporate governance system. We find that guanxi is in general a double-edged sword, but business-to-government guanxi in particular can harm the weak Chinese corporate governance system and hamper its further economic development and growth.

Asian Family Firms through Corporate Governance and Institutions: A Systematic Review of the Literature and Agenda for Future Research

“…Additionally, guanxi is practised intensively and more vertically (from the point of guanxi base/inner circles) between family firms, especially within family business groups (Carney and Gedajlovic ), because family members tend not to do business with strangers (Braendle et al . ). Indeed, the success of family business groups is deemed to stem from guanxi (Lasserre and Schūtte ).…”

Factors Affecting Leveraging for Quoted Real Estate Development Companies in China

“…"Guanxi" (business/personal relationship) was positive and statistically significant at 5% level confirming our apriori expectation that "guanxi" will influence company leveraging position. According to Braendle et al, 2005;Wang, 2007;Liu et al, 2008, "Guanxi" (business/personal relationship in business necessitate easy flow of information and financial resources, this help to mitigate the problem of costs of transactions, efficiency improvement and resource allocation (Siu and Bao, 2008). The amount interest paid on funds borrowed was significant at the 5% level and had a negative sign.…”

“…Guanxi: According to Braendle et al, 2005;Wang, 2007;Liu et al, 2008 , "Guanxi" (business/personal relationship) in business necessitate easy flow of information and financial resources, this help to mitigate the problem of costs of transactions, efficiency improvement and resource allocation ( Siu and Bao, 2008).…”

Employee Behaviors, Supervisor-Subordinate Guanxi, and Workplace Exclusion

“…The Law et al's [16] study has shown that supervisor-subordinate guanxi was related to the supervisor's decisions on employee promotion and bonus allocation beyond task performance. Thus, by establishing and developing high quality guanxi with the supervisor, the Chinese subordinates will have the advantage of acquiring valuable resources and getting their distinctive competitiveness [18]. What's more, in Chinese organizational context, an individual's status in a group is always determined by his or her personal guanxi with the key figures in this group.…”