HSE University Anti-Corruption Portal
You scratch my back and I'll scratch yours: Guanxi and Bribery

TRACE International has published a white paper Guanxi or Bribery? Managing Expectations of Reciprocity in China. The aim of the paper is to show how guanxi can be managed to be more compatible with international anti-bribery standards.


Guanxi (guānxì) constitutes an important part of Chinese culture. It implies some sort of social exchange: one does a favour, bearing in mind that, if necessary, it will be returned at a later date. In China, this informal relationship is actually more highly valued than the formal one and is cultivated in many areas of life (for the history of guanxi and examples please consult, for instance, the respective article of the Global Informality Project).

In spite of the fact that people from other cultures associate it with “pulling strings”, “cronyism” and “bribery”, guanxi does not mean corruption for the Chinese. However, the practice of providing gifts, entertainment, meals and travel to Chinese partners (primarily, to public officials) often supplies a rationale for holding liable foreign companies for bribery, in the first place, under the U.S. Foreign Corrupt Practices Act (FCPA).

The authors of the paper analyse the role of guanxi in conducting business in China and its relation to the FCPA provisions, suggesting how to manage guanxi without violating international anti-bribery standards.

Role of guanxi in conducting business

According to the TRACE analysts, the overlap between guianxi and corruption is due to a distorted understanding of its nature: true guanxi means building confidence based on reciprocity, rather than influencing decision-making.

In this context, it is crucial how this confidence is developed. For instance, gifts do play a central part in this dynamic, but their meaning depends on the context in which they are offered. Aiding a friend in time of need - “sending a charcoal in a snowstorm”, as the Chinese say, - without expectation of reciprocity, would be much more important for good guanxi than giving a gift for no reason or doing a favour with an expectation that the recipient would reciprocate. Therefore, guanxi is cultivated through a consistent demonstration of good will and gratitude in appropriate context, which makes an individual a reliable business partner.

FCPA and courtesies

The FCPA generally prohibits bribery of foreign officials by natural or legal persons for the purpose of gaining or securing an advantage for their businesses. In this case, the provision of gifts, entertainment, meals, travel, flights, accommodation and services to foreign officials may constitute the subject of bribery.

In this context, the authors of the paper suggest that it is not a violation of the FCPA if there is no corrupt intent and a courtesy is provided out of respect for national culture and customs in order to establish a relationship of trust with partners rather than to “corruptly” get a certain advantage for business purposes in China. However, the TRACE experts highlight that the line between the corrupt and the non-corrupt is indistinct, especially when there is no evidence demonstrating the nature of the intent of the offeror. Consequently, the authors draw up a list of factors that may influence the determination of a corrupt intent:

  • whether the foreign official has authority over decisions affecting the offeror;
  • the secrecy surrounding the offer/service (for example, notification to the superiors regarding the receipt of the gift);
  • frequency of courtesies offered to a particular foreign official;
  • language used in communications with the foreign official (for instance, promising to make “some gestures” if the contract is approved);
  • the way the expense is characterized in corporate financial records;
  • whether the foreign official requested the specific business courtesy or specified its expected value;
  • local cultural customs regarding acceptable occasions for business courtesies and their typical acceptable value or kind;
  • whether local laws or regulations prohibit or restrict such business courtesies;
  • whether the favor or gift can be easily monetized for personal gain through sale or exchange (for example, it is commonly understood that a souvenir with a hard-to-remove company logo or perishable items present less risk).

“Good guanxi”: Tesla’s case

In 2012, China’s State Council formally acknowledged that the number of new energy automobiles should be increased due to deteriorating environmental pollution. However, the country had an inadequate electric vehicle charging station infrastructure, which actually caused a low demand for those vehicles.

It was against this backdrop that U.S.-based electric car manufacturer Tesla announced in 2014 a plan to build a countrywide charging network for its electric vehicles in China. Working in partnership with the state-owned company China Unicom Tesla would install charging outlets at 400 Unicom stores in 120 cities. On the one hand, the building of charging outlets was a commercially reasonable decision for Tesla, which would allow the demand for its electric cars to grow in China. On the other hand, this gesture dovetailed nicely with the policy initiative of the Chinese government to increase electric vehicle sales. The authors therefore believe that Tesla’s actions might have been received by the Chinese government as a welcome instance of “sending charcoal in a snowstorm”, providing it with favourable treatment in the future.

The TRACE analysts therefore conclude that the cultivation of a good guanxi does not imply illegal actions. Conversely, guanxi may constitute a basis for a strategic approach to conducting business in China underpinned by understanding of the current political agenda and needs of the country, and actions which are not prohibited by law with a view to support the government in achieving its goals.

In spite of the fact that the subject addressed by the TRACE experts definitely deserves attention and will be interesting to companies that conduct their business or seek entry into the Chinese market, practical relevance of the advice the authors give is questionable. Indeed, as regards the FCPA article concerning bribery of foreign public officials, the “corrupt intent” of a person that offers a gift/provides a service to a foreign official is an indispensable component of a crime. At the same time, the analysis of existing law enforcement practice demonstrates that the U.S. Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) employ quite an aggressive strategy and do not always bother about proving the “corrupt intent” of foreign companies or their employees when they hold them liable for FCPA violations.

This approach seems to have been adopted largely due to a widespread practice of concluding non-trial settlements to solve cases: Deferred Prosecution Agreement (DPA), Non-Prosecution Agreement (NPA) and Cease and Desist Order. If law enforcement bodies have to prove the guilt of an entity in a court of law, they should necessarily gather unequivocal evidence to defend their position, while in the case of settlements the DOJ and SEC can easily do without proving the “corrupt intent” of an entity’s actions beyond reasonable doubt, for instance, by charging it with the violation of other two FCPA articles – violation of bookkeeping and internal control provisions - rather than with bribery of a foreign official. It is noteworthy that the number of entities charged with the violation of only these “collateral” FCPA article, excluding charges of bribery, has significantly increased in recent years: for instance, just in 12 out of 21 or 57 per cent of cases solved in 2019-2020 legal persons were charged with bribery of foreign officials*.

Therefore, in our opinion, companies that do not want to be charged with FCPA violations should very cautiously follow the advice provided by the TRACE experts based on their conclusions.

*For the purpose of the provided statistics the cases solved in parallel by the DOJ and SEC regarding the same corrupt practices of entities were considered as a single case of liability of an entity.

Foreign bribery
Civil society

We use cookies in order to improve the quality and usability of the HSE website. More information about the use of cookies is available here, and the regulations on processing personal data can be found here. By continuing to use the site, you hereby confirm that you have been informed of the use of cookies by the HSE website and agree with our rules for processing personal data. You may disable cookies in your browser settings.