Is Guanxi Universal in China? Some evidence of a paradoxical Shift

The article reports on a study to examine the application of guanxi attributes and the pathways linking them to success and performance in the context of business-to-business relationships in the Chinese diamond industry. We draw on and adapt the Ganqing, Renqing and Xinren (GRX) scale to reveal a paradox in terms of how business is conventionally conducted. This is interesting because in Western markets that are typically governed by arms-length transactions the diamond industry is somewhat unique, as it is built on very close socially driven relationships. The paradox also occurs in the Chinese context, as the opposite is prevalent i.e., in a nation that often relies on social guanxi ties to drive business, the diamond industry is heavily characterized by a somewhat antagonistic arms-length approach. The study pieces together and tests a concept drawing on a sample of 212 diamond merchant traders operating in China. We discover that interpersonal trust (Xinren) has a positive influence on both emotional attachment (Ganqing) and obligational favor (Renqing), but has a direct negative influence on Performance (the paradox). Ganqing serves to positively influence Performance and Renqing leads to greater Satisfaction - which in turn has a positive bearing on Performance. Several implications are extracted from the study that provide useful insights into the ways that guanxi is perhaps becoming more or less prevalent in China.