Informal Financing Model Based on Personal Relationship: Chinese Entrepreneurs in Brazil

Abstract

Differently of social tie that normally occur in Western country, the mutual trust and favor exchanged relationship that is quite common in China called guanxi. The Guanxi strongly influences on the Chinese’s businessman behavior. This is the base of informal financing models, which is one of the key factors responsible for small and medium enterprises (SMEs) growth in China. The objective of the paper is to analyze empirically guanxi-based model of informal financing in the Brazilian business environment. The exploratory method was applied, a sample of interviews with Chinese SME’s entrepreneurs in Brazil. The evidences suggests that i) the entrepreneurs uses guanxi to have accesses to informal financing and to reduce cost of financing; ii) The commercial credits and direct loan are heavily used by Chinese entrepreneurs and the bank short term loans are avoided; iii) the Brazilian institutional environment influences the models.

Keywords: Informal Financing, Guanxi, Small and Medium Enterprises, Entrepreneurship, Brazil and China, Emerging Market

JEL Classification: J43, J61