Guanxi: Your Ultimate Business Card in China
Guanxi is a Chinese word recognized in Asian business cultures including Korea and Japan. In Chinese, Guan refers to a “door”, or to “close up” with those inside a group whereas Xi can be interpreted to mean a joined chain. Thus, Guanxi can be translated to mean relationships or connections between people and groups. In Chinese dominated societies, people use the world Guanxi to refer to someone who is well connected, knows lots of people and can get things done not necessarily through the formal channels. The Chinese business mentality is analogous to ”You scratch my back, I’ll scratch yours.” Essentially this boils down to exchanging favors regularly. Chinese Guanxi is such an important concept to understand if you want to function effectively in China.
The Importance of Guanxi
Regardless of the business experiences in respective countries, in China Guanxi is what establishes who you are, your role in business, your character, ethics, and values. It is that one card that you will always carry in every Chinese business deal you career notwithstanding. With the right Guanxi, any organization minimizes the risks, disappointments and frustrations when doing business in China. It is acquiring the right Guanxi with the relevant authorities that determine the organization’s competitiveness in the long run in China. With a Guanxi network working for you, you will be able to minimize the inevitable risks, set-ups and barriers encountered in China.
In China, the process of developing and nurturing Guanxi can be demanding on resources and time. However, all the money and time spent on building a network is well worth the investment. In the long run, businesses will return your favors in a much more valuable way. In business, Guanxi goes beyond the colleagues, and it encompasses relationships within business associates, intersecting with one’s circle of friends and family relationships. Some of these relationships go back in generations.
Domestic businesses in China establish Guanxi networks with local government officials, retailers, banks and suppliers. It is very common for individuals from organizations visiting their acquaintances bringing along gifts including cigarettes and wine. The process might seem intrusive, but for the Chinese, it is commonplace to use gifts to sweeten business deals. For a foreigner who wants to do business in China, pay close attention to your immediate Chinese network and try establishing a relationship with them. They can easily connect you to new information resources and acquaintances thus helping you develop other good Guanxi that you need.
How Chinese Business Works
In China, a lot of business revolves around circles of personal and mutual trust. Having said that, any outsider who wants to do business in China must take their time to establish a Guanxi. The process has been quite a challenge for many western companies trying to get into the Chinese market. Business relationships made through Guanxi must be maintained to ensure proper positioning for future business. Most international company members think this relationship funds on a direct exchange of cash, but this is not always the case since Guanxi can also build by hosting dinners for prospective business partners or clients. Positive business relationships can create an environment for Guanxi.”
The exchange of favors doesn’t necessarily have to be in the same form. For instance, if one person helps introduce you to a prospective partner, it is not beyond the scope of the relationship for that party to then ask you to help get their son into an international school or get a visa to your home country. Failing to repay favors is analogous to not paying financial obligation and if you can’t accommodate a certain request then find a way to make amends perhaps send a gift to show that you still want to maintain a relationship.
Establishing the Relationship
Guanxi doesn’t entirely base on the money. For instance, politely or decently treating someone unfairly treated can be quite a good place to start a relationship. Guanxi starts with and builds on trust i.e. the trustworthiness of the company or an individual. If a particular company promises certain things and delivers them as such, then the company is showing loyalty and the Chinese people would easily incline towards them. Also, reliability and being dependable undoubtedly strengthens the relationship. Guanxi is easily explained using 1989 political instability in China whereby companies that chose to stay enhanced their relationship with Chinese people and became close as friends.
Additional, regular contact with each other fosters emotional bonds and understanding and the Chinese are obliged to do business with their friends first. Guanxi and relationships easily function as information networks hence companies with extensive contact networks always have an upper hand in performance compared to those with little or no connection with the Chinese. Relationships with local government or political officials are on the decline since the government officials are always moved from office to office and region to region.
It takes some time to build the right Guanxi and it doesn’t happen overnight. There are no shortcuts and does not push too hard, or it will destroy your credibility. Participate more in long business meetings and after-work drinking to help learn and understand your prospects better. It is important to note that, it doesn’t mean that once you’ve established a Guanxi that you don’t have to follow rules, customs, and law since it can easily get problematic.
What Guanxi is Not
While having the right Guanxi in China gives you an upper hand in experiencing business success in China, this doesn’t necessarily mean that business starts with it and ends with it. Your company needs to have a high overall business operation for you to experience success. While these connections are paramount in helping you find new opportunities and open doors, your corporate strategy must also be attractive.
Guanxi should not be confused with bribery. Many American Business people get confused about the difference between Guanxi and bribery since the Chinese business etiquette includes the exchange of gifts between potential business partners. The exchanges act as an ice-breaker and a great way to establishing “Guanxi” as well as present an opportunity to express character. “Guanxi” represents courtesy and good wishes and it does not bribe.
Offer and accept a gift just as you would a business card. Treating Chinese highly indicates your desire to deal squarely with your Chinese counterpart and treat him as an equal partner. When you leave, your Guanxi will follow you. Your Guanxi is a network of relationships, good will, and trust among people that you built up over the years. Creating a Guanxi network in China is like walking through a thick mist where you constantly have to feel your way through it. It can be used to open the doors of opportunities, and it is your super business card in China.