Guanxi networks are of great importance in business and financial transactions, and hence the relevance of guanxi to management and understanding of business in China is extreme.
According to Ramasamy and Goh (2006, p.130) “guanxi is the lifeblood of Chinese business communities, and frequently acts as a lubricant of business activities”. Guanxi is also considered as being “a channel of knowledge transfer” and two specific aspects of guanxi are related with such a channel - “trust and communication” (Ramasamy and Goh, 2006, p.130). Guanxi has also been related to the human resources management of firms that operate across China. Law and Jones (2009, p.313) revealed that various aspects of guanxi need to be clearly understood by HR managers in both Chinese and foreign firms.
Guanxi has been related to other parts of business activity in China. In a study by Lee and Humphreys (2007), guanxi was found to be a critical factor affecting a firm’s supply chain management: in aspects of strategic purchasing, outsourcing, and supplier development (Lee and Humphreys, 2007, p.45). Though guanxi influences the development of various business activities in China, a differentiation has been identified “in the way guanxi is utilised in state-owned and foreign-invested enterprises” (Wood, Whiteley and Zhang, 2002, p.263). The study by Wood et al. (2002) found that guanxi is considered to be an important criterion but it seems to be more appreciated in state-owned enterprises rather than enterprises based on foreign capital. The above view is in accordance with that of Liu and Roos (2006, p.432) who noted that “the guanxi-driven paradigm remains a crucial factor in planning and managing effective working relationships when the Chinese partner is one officially classified as “restricted”. In other words, guanxi influences the business activities in China – affecting also the decisions of Chinese managers – but this influence seems to be