Social Logic as Business Logic: Guanxi, Trustworthiness and the Embeddedness of Chinese Business Practices

This chapter explores the nature of Chinese business practices by looking at their social foundations. We argue that the use of an inter-subjective logic based on the norms of social relationships provides an institutional foundation for economic transactions in Chinese business settings. The logic of social relationships-or what we call guanxi logic-is embedded in daily practices of the Chinese business community. Rather than making economic decisions less "economic", relational rules embedded in guanxi places interpersonal business transactions within a prescriptive framework, thereby increasing the calculability of economic outcomes. Guanxi logic is, therefore, a socially meaningful way to enhance economic rationality. Although relational rules play a role in Chinese economic practices similar to that of a legal framework in Western economic practices, the results are quite different. Whereas Western legal norms depersonalise market activity, Chinese relational rules personalise transactions, making them part of the interpersonal social matrix of daily life.