China Goods Recalls Due to Nation’s Relationship System

Newswise — The series of China-based product recalls that have rocked international markets in recent weeks are a direct result of the continued importance of the nation’s complex system of guanxi, or relationships, according to Colgate University sociologist Carolyn Hsu. Although guanxi — which involves using personal networks and granting and returning favors to do business — has fueled China’s extraordinary economic growth, it has also taken the place of binding contracts and an adequate legal structure, and enabled the government to put off implementing necessary quality control reforms, she said.

An associate professor of sociology at Colgate, Hsu studies post-communist transitions in China, and has published research on Chinese entrepreneurship, business organizations, and corruption. A related book, Creating Market Socialism: How Ordinary People Are Shaping Class and Status in China (Politics, History, and Culture), will be published Sept. 30.

Hsu explained that since the beginning of market reforms, the Chinese state has alternated between being permissive and strict in its dealings with business. Officials allow entrepreneurs to experiment for a few years to see what comes up, and then suddenly clamp down as they create new rules for regulating emerging practices. “Right now, China is full of entrepreneurs and business owners who are basically inventing their own version capitalism, and the government hasn’t quite figured out its own role just yet,” she said.

“Even though the country is an authoritarian state, the government needs popular support to survive,” she continued. “It also needs economic growth, which is dependent on international trade. The people, however, are furious about all of the recent product recalls. Dangerous products, like the Mattel toys with lead paint, hurt China’s economy, reputation, and on many others levels, so I think something will give soon. The government will have to step in.”

Of the future, she added: “China is an authoritarian state with a lot of power, and it has every incentive to deal with these issues. I would expect the recalls to lead to real changes, and that Chinese goods will become safer in the coming months.”

Founded in 1819, Colgate University is a highly selective, residential, liberal arts college serving nearly 2,750 undergraduates. Situated on a rolling 515-acre campus in central New York State, Colgate University attracts motivated students with diverse backgrounds, interests and talents.