Guanxi Either Retires or Goes to Jail

Monday, June 22, 2009 6:13
Posted in category Invest in China, Red Tape

Good friend, and frequent commenter, Jay Boyle once said that “Guanxi either retires or goes to jail“, and over the past few years in particular we have begun seeing this as Beijing clamps down on a number of officials for graft.

Most recently the removals of Shenzhen Mayor Xu Zongheng and Pi Qiansheng Binhai New Area Investment Zone Director caught my attention as these men were in the drivers seat of major economies, economies that were view as drivers of China’s march to 8% GDP growth.

A few notes of where I find these arrests as important:
1) Many firms when entering China travel from zone to zone looking to find the best deals. Deals that are sometime in contravention with Beijing’s guidelines for incentives. 2 years ago while visiting Suzhou on one such trip were were flatly told that the days of old were gone, and that a new path was being taken. For some, like my client, they chose Suzhou regardless, but for others the search continues further inland. To areas that were reportedly giving better deals.

Deals that could come under inspection

2) The old boys network in Tianjin and Shenzhen are being dismantled, and Beijing wants more control. Tianjin, a city that was only until a few years ago largely managed by those born in Tianjin, Beijing has taken advantages of a few opportunities to dilute this power base and exert its control. for the average firm, in the short term, this may not seem important, however for firms looking to invest at the highest levels or for those firms hoping to skirt the rules, things could change quickly.

Some food for thought on a couple of recent new pieces, and for those with a larger apetite, I highly recommend the article  China’s Governance Crisis and China’s New Leadership

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5 Responses to “Guanxi Either Retires or Goes to Jail”

  1. gregorylent says:

    June 22nd, 2009 at 6:43 am

    are you saying corruption is lessening?

  2. Rich says:

    June 22nd, 2009 at 7:45 am

    No, I am not saying that it is lessening.

    I am saying that the risk of getting caught is increasing, and that firms who are caught up in the storm could see their short term “incentives” removed.


  3. Bill says:

    June 22nd, 2009 at 8:16 am

    There are 40 million CCP members and government officials. Only about 400,000 or so a year were processed for corruption. And some of them die away. But over 1 million a year join the rank. At this rate, corruption will only increase.

  4. Tim says:

    June 23rd, 2009 at 4:03 am

    My favorite Jay Boyle quote.

  5. Good Guanxi Gone Bad. The limits of Guanxi. says:

    August 31st, 2012 at 4:30 pm

    […] So what are we saying here?  Are we saying having good connections is a bad thing?  No.  Are we saying never use your connections to your advantage?  No, we are not saying that either.  What we are saying is that you should always be mindful of the risks inherent in going sidestepping the law and always beware of how doing so can come back to bite you. Or to put it another way, Guanxi Either Retires or Goes to Jail. […]