Accountability in Corporate Governance in China and The Impact of Guanxi as A Double-Edged Sword

Accountability is an essential aspect of corporate governance and it has been argued that the “wenze” system of accountability in China comes very close to the accountability systems developed in Anglo-American corporate governance. This Article examines the role of cultural factors, namely guanxi and its derivatives, in corporate governance in China to determine what effect, if any, these cultural factors have on the operation and development of the “wenze” system in large listed companies. The Article specifically considers whether the cultural elements affect accountability, and if so, how and to what extent. It also explores whether these cultural factors are good, bad, or neutral as far as the development of accountability in fostering good corporate governance is concerned.

The Article advocates a realistic, functional, and culturally sensitive corporate governance accountability system in China, under which guanxi and its derivatives will not be regarded as a substitute for accountability, but will work within the “wenze” system of accountability. Meanwhile, the Article’s analysis also demonstrates that guanxi is a double-edge sword, for while it can be an impediment to accountability, it is not totally inimical to ensuring that there is accountability.