To many Westerners China seems a mysterious and unfathomable country, and the behaviour and mindset of her people almost impenetrable. One thing that appears to have been puzzling Western observers for decades is the question of moral values and interpersonal relationships in Chinese society.
Among East Asian nations, China is the one that conceals best her true nature. While in Japan or Korea, for example, hierarchical structures are visible both in the deportment and in the language of the people, China at first sight appears to have a much less complex and stratified society. But when one looks more carefully, one can see that hierarchy, social roles, and ritualism are extremely important elements of Chinese culture. Without an understanding of them, one cannot understand China.
Of course, etiquette and rites have changed radically in the Chinese-speaking world over the centuries. However, what has not changed is the particular emphasis placed on ‘rules of proper behaviour’ and ritualism in Chinese thinking.
Chinese philosophers such as Confucius and Xunzi did not view etiquette and rites as mere formalities. They saw them as powerful tools that moulded individuals’ characters and made them fit in the hierarchical order of society. According to Confucius, “The whole world would respond to the true goodness of [a ruler] who could for one day restrain himself and return to ritual” (Chinese Civilization: A Sourcebook, 2nd EdPatricia Ebrey 2009, p. 42). 
The Confucian scholar Xunzi, who believed that man is by nature bad, argued that rituals were one of the most important ways to educate people to good behaviour:

A warped piece of wood must be steamed and forced before it is made straight; a metal blade must be put to the whetstone before it becomes sharp. Since the nature of people is bad, to become corrected they must be taught by teachers and to be orderly they must acquire ritual and moral principles. When people lack teachers, their tendencies are not corrected; when they do not have ritual and moral principles, then their lawlessness is not controlled.

In antiquity the sage kings recognized that men’s nature is bad and that their tendencies were not being corrected and their lawlessness controlled. Consequently, they created rituals and moral principles and instituted laws and limitations to give shape to people’s feelings while correcting them, to transform people’s emotional nature while guiding it. Thus all became orderly and conformed to the Way (ibid., p. 25). 

Detailed rules of etiquette were complied in an ancient text, the Book of Etiquette and Rituals (simplified Chinese: 仪礼; traditional Chinese: 儀禮). This book described minutely the rules of behaviour of individuals according to their ranks: rulers, nobles, high officials, low officials, and gentlemen (see ibid., p. 42). Here are a few excerpts that explain how host and visitor ought to behave. These scenes show the complexity, solemnity and ceremoniousness of role-specific social interaction:

THE VISITOR: I have desired an interview for some time, but have had no justification for asking for one. Now his honor So-and-so has commanded me to visit. 

THE HOST: The gentleman who introduced us has ordered me to grant you an interview. But you, sir, are demeaning yourself by coming. Please return home, and I shall hasten to present myself before you. 

THE GUEST: I cannot disgrace you by obeying this command. Be good enough to end by granting me this interview. 

THE HOST: I do not dare to set an example of how a reception of this kind should be conducted, and so I persist in asking you to return home, and I shall call on you without delay. 

THE GUEST: It is I who do not dare to show that example, and so I persist in asking you for an interview. 

THE HOST: Since I have failed to receive permission to decline this honor, I shall not press it further. But I hear that you are offering me a gift, and this I must decline. 

THE GUEST: Without a gift I cannot dare to come into your presence. 

THE HOST: I am not worthy of these ceremonies, and so I must persist in declining. 

THE GUEST: If I cannot have the support of my gift, I dare not pay you this visit; so I persist in my request.

THE HOST: I also am decided in declining; but as I cannot secure your consent, how dare I refuse?

Then the host goes to meet the guest outside the gate, and there bows twice, answered by two bows from the guest. Then the host, with a salute, invites him to enter. The host goes in by the right side of the door, the guest holding up the present and entering by the left […].

When a gentleman visits an official, the latter declines altogether to receive his present. At his entrance the host bows once, acknowledging their difference in rank. When the guest withdraws, he escorts him and bows twice. When a gentleman calls on his former superior, the host formally declines the visitor’s gift: “As I have not been able to receive your consent to my declining, I dare not persist in it.” Then the guest enters, lays down his gift, and bows twice. The host replies with a single bow. When the guest leaves, the host sends the attendant to return the gift outside the gate […].

At their first interview with the ruler, visitors carry a gift, holding it on a level with the girdle. Their deportment shows a respectful uneasiness. When commoners have an interview with their ruler, they do not assume dignified carriage, but hurry along both in advancing and retreating. Gentlemen and officials lay down their present and kowtow twice. To this the ruler responds with a single bow. If the visitor is from another state, the usher is sent to hand him back his gift, saying: “My unworthy ruler has sent me to return your present.” The visitor replies: “A ruler has no ministers beyond his own borders, and therefore I dare not refuse to do as he commands.” Then kowtowing twice, he receives it back (ibid., pp. 42-44).

Rules of Propriety and Social Roles

Although etiquette and rites in the Chinese-speaking world have changed radically over time, under the surface of modernity Chinese societies still maintain a great deal of their hierarchical and role-specific structure, and therefore etiquette, i.e. proper behaviour, as it is defined by social customs, still plays a major role in Chinese people’s daily life. 

Remnants of the old etiquette can be seen in different situations. For example, once I was invited to dinner by a Chinese family. I was often told by my hosts “not to be polite” (不要客氣) and to try more dishes; this exhortation is based on the assumption that a visitor will refuse something offered to him a few times for the sake of politeness. But in my case, I simply didn’t like that particular food. Nevertheless, I had to eat it in order not to offend my hosts. Chinese etiquette often leaves little room for mutual understanding and honest confrontation, because it is a predefined and somewhat rigid set of rules.

Another example is that of a student who showed around some exchange students from Europe. They asked her where they could buy camera lenses, and she took them to a street where there were many electronics shops. She said those shops were cheap. However, that wasn’t so and the exchange students remarked that the lenses were more expensive than in Europe. The Chinese girl looked frustrated and also quite annoyed. Her guests were not supposed to show their disappointment so openly. according to etiquette they should have shown appreciation and avoid complaining.
Most importantly, rules of propriety are part of the guanxi system, that is, the system of social networks. Many Westerners who have been to China for travelling or business may have noticed the existence of ‘unwritten social rules’ that govern people’s relationships. For instance, a recent guide for people who want to do business in China states:

When you first arrive in China, you need to pay courtesy visits to show interest and respect. You need to proactively spend time and energy to build personal relationships and trust with your major customers and key government officials. On an ongoing basis, you need to throw banquets for them to show your appreciation […]. Gift-giving for special holidays such as the Chinese New Year and Moon Festival can be a good idea to show good gestures and friendship (How to Do Business in ChinaMichael Yih-chung Shen 2004, p.99).

The ‘polite’ and ‘proper’ gestures that define the particular nature of interpersonal relationships are a residue of the old role-specific etiquette. Behind this etiquette there hides a web of individual interests, expectations, and social stratifications. It is fundamental for Western people to understand that oftentimes life in China is about ‘role-play’. People act according to certain unwritten rules of propriety that depend on the position, mutual interests, and in certain cases hierarchical relationships between individuals. Such rules are so pervasive that they can be found in nearly every area of social life. 
When Harold James, a retired Australian businessman, first started to do business with the Chinese in Malaysia, Hong Kong, Indonesia, and Taiwan he “initially found it extremely difficult […] because [the Chinese] were very interested in establishing friendship first rather than dealing in business […]. They virtually had to sit through many sumptuous and lengthy dinners and were entertained night after night. On occasions, their Chinese hosts also supplied women companions” (Negotiating With the ChineseGoh Bee Chen 1996, pp. 166-167).
The word ‘friendship’ here is not to be understood in its Western meaning. It is rather a term that defines a relationship of mutual interest and reliability governed by ‘proper’ behavioural patterns, and shared expectations and obligations. 
Let’s take a look at another example. The following passage from Zheng Tiantian’s Red Lights depicts the relationship between four Chinese business partners, for whom going to karaoke bars (i.e. brothels) is part of the social ‘rituals’ that they need to perform in order to strengthen their network of mutual dependencies and also to display and clarify their different social roles. We can see that this relationship is ruled by an implicit code of ‘propriety’ which is standardised and socially defined.    

Xie, a high-level official in Dalian, introduced me to his three friends. They were part of his social base that helped secure his official position and wealth. Their relationship illustrates that the lines between state and society, public and private spheres are not clearly drawn in China. Hu and Ren were owners of private enterprises. Jin was the head of a police bureau in the central district of Dalian. More than a thousand karaoke bars, hotels, restaurants, sauna salons, and nightclubs fell under his jurisdiction. Xie emphasized to me the importance and inherent danger of these connections. Nobody can rise to power without the help of one’s friends, and nobody can maintain that power if one of those friends fails. Each “friend” contributes and receives, in what, if successfully cultivated, can develop into a long-term exchange relationship. Each of the friends had resources to offer the others: Xie, his official power; Hu and Ren, their economic power; and Jin, his legal and administrative power. To strengthen their ties, they often gathered in restaurants, karaoke bars, and sauna salons. The bill was always taken care of by the entrepreneurs Hu and Ren. 

The three men started bragging about how they once spent more than 4,000 yuan on beer, French wine, ecstasy (yaotouwan), and the hostesses’ strip performance. They were encouraging the three hostesses to perform a strip dance after taking ecstasy […]. 

Jin’s strategy of eliciting from the hostess a confirmation of his own appeal to women, affirming his manhood and masculine charm, was a transparent use of the hostess as a vehicle to demonstrate his charisma and potency, and ultimately, his power, to his business partners. It is apparent that the power of the patrons is demonstrated both by their conspicuous consumption and by their capricious treatment of the women (Red Lights: The Lives of Sex Workers in Postsocialist ChinaTiantian Zheng 2009, pp. 107-112).