ABSTRACT
Since China opened up to the global market in 1978, it formed an economic system that in literature is often called Guanxi or network Capitalism. It presents a specific type of Capitalism, and is embedded in the cultural environment of post-1978 China. It is described as being constituted of a different set of institutions than Western-type Capitalism, especially relying on personal connections to facilitate business, comprising a way of doing business ‘Chinese style’. It is often doubted that this version of Capitalism will be sustainable and many believe that over time it will transform into a system that converges to the usual contractual market institutions found in the West. Once the economy develops into a mature capitalistic society with its own functioning set of legal institutions and secured property rights, the necessity of maintaining Guanxi connections for being successful in business will come to an end. This line of argument also perceives Guanxi as less efficient and more time and money consuming than the Western contractual institutions. Western Capitalism is conceived as inevitably leading to a system with large-scale enterprises under efficient rational management that is independent of specific individuals and their personal connections.
