Guanxi
Compared to E-commerce superpowers like the United States of America, China had long suffered from lacking a broad system of rules and impartial courts, missing developed institutions efforts to adequately open to a market-based economy (Martinsons, 2008). This profound inability to open itself to the world has long been a curse for any new business, forcing then chief executives to deem e-commerce as “hopeless” in China (Wong, 2001). 关系(guānxì) is the Chinese for relationships, useful contacts that can turn into helping hands, and heavily relates to and is based on the behavior of the person, meaning that if one’s behavior is depreciable, he loses his connections, his helping contacts, his “face”. Guanxi is the foundation of modern Chinese economy and until recently, was the only system rule structure (Xin & Pearce, 1996).
Chinese must depend on guanxi in order to ordinarily do business. The power of this particular feature of Chinese society has largely been lowered thanks to new openness from the CCP to capitalism, bridging the gap left by the lack of institutional rules. Before that, people in China used (and actually still) to do business just with those who they personally knew, like family members, long-time friends, classmates and close people in their network connections (Martinsons, 2008).
New partnership are built around recommendations by close groups. Those who advance these recommendations are highly reliable, because loosing trust in members of one’s personal network group, is China more than in any part of the globe, is equally related to losing one’s face, and personal conduct is what makes the difference between a trustful agreement and a broken one (Tang & Ward, 2003). As China opened to the global market, and since the introduction of a new developed transportation system along with institutional rules, having guanxi today has just the same effect of saying that somebody has business contacts. Guanxi is attractive just when it is geographically restricted and participants are of a certain small number (Martinsons, 2008). Relationship-based commerce restricts market scale and scope, while keeping supply chain fragmented and poorly coordinated (Lovett et al., 1999). This inefficiency “has discouraged the development of business services that benefit from economies of scale (Martinsons, 2008).
Trading to the world 