Anyone doing business in China must become familiar with Guanxi. Commonly described as the system of social networks and influential relationships which facilitate business and other dealings, Guanxi is a crucial part of business life in China. Leadership expert Steve Tappin says it’s simply part of the “social fabric” in China. “It’s very difficult to get things done without it,”
In Chinese, Guan means “gate or hurdle”, and Xi means “a tie, connection or relationship”. So, Guanxi, in English could be loosely translated as “pass the hurdle and get connected”. In business etiquette guides it’s typically equated to the Western concept of networking.
For those who have to deal with Chinese companies, it is important to remember that:
1. Unlike in the West, in China, the creation of personal friendship is a prerequisite of doing business. Avoid rushing into things as relationship building takes time. It does not just start when sales take place but it is an ongoing process.
2. Invitation to sports and other events and dinners is one key element in building relationship. At these events, where everything but business is discussed, alcohol plays an important role. Learn to drink intelligently. Seasoned negotiators cleverly dispose of the alcohol into their water glasses or into the wet towels!
3. Guanxi does not have to be based on money. Although the direct giving of gifts is a common form of building Guanxi, it isn’t the only way. Treating someone with decency while others treat him/her unfairly could result in a good relationship.
4. Reciprocal favours are the key factor to maintaining one’s Guanxi. Failure to reciprocate is considered an unforgivable offense. The more you ask of someone the more you owe them. Guanxi can perpetuate a never-ending cycle of favours.
5. Be dependable and reliable so that you can be counted upon in good and tough times. Companies that stayed put during the political instability of 1989 found their relationship strengthened as they were viewed by the Chinese as friends who did not abandon them.
6. Guanxi with high rank officials is still important for doing business in China, though declining of late due to somewhat lesser interference in business.
7. There is a fine line between Guanxi and bribery. The path to Guanxi isn’t easy. Tipping to one side can put relationships made in this way a case for legal action.
8. Guanxi carries an element of trust. A lot of business in China revolves around circles of personal and mutual trust. So Guanxi is important for any outsider to do business in China. This has been a big obstacle for many western businesses trying to enter the Chinese market. Business connections made through Guanxi must be maintained to ensure proper positioning for future business.
So, create your own Guanxi. And remember, companies with strong and wide Guanxi networks often have much higher performance than companies with little or no relationship with the Chinese.