Doing Business in China? How’s Your Guanxi?

by: John Hartley (VP Asia Pacific)

Stratford Managers welcomes John Hartley, our new VP Asia-Pacific.  With his years of experience in the region, John offers unique insight into doing business in China.

The typical translation of the Chinese word Guanxi is “relationships”, however it is more accurately described as relationships with mutual obligations, goodwill and personal affection.  While Western business culture is often transaction-based, Chinese business culture tends to be relationship-based.  To be rich in the West is to have lots of money.  In China you are rich if you have a strong and healthy network of relationships.   

As it has for centuries, even in today’s globalized financial environment, very little happens in Chinese business without the effects of Guanxi.  Of course Western business also relies on relationships and social standing, but it does not match the multi-layered Guanxi network in Chinese business. Any company seeking to be successful in China should have a conscious plan to secure its Guanxi.

In Western business culture once an agreement has been reached, or an order fulfilled, each party usuallly moves on to the next opportunity.  The Guanxi perspective is to maintain the relationship long after the transaction is completed. More often than not the relationship will flourish even when there is little prospect of further revenues, sometimes progressing to a personal level.

Trading, operating or selling in China is challenging in many ways.  Differences in time zones, language and business practices all must be managed.  However it is having the right Guanxi that will ultimately determine success or failure.  I have experienced Guanxi first hand on many occasions during my years in China.  I see it in practice every day and have often benefitted from its power both professionally and personally.

There is no secret to good Guanxi.  It is just about honesty, respect, doing what you say you will do and placing a high value on friendship and loyalty.  Honest relationships are one of the age-old Confucian values. Chinese people would generally rather work with someone they know, or someone introduced by someone they know, than with a stranger, even if the stranger appears to have a more compelling proposition. 

The more Chinese business contacts know about you, the more comfortable they feel and the more reciprocal Guanxi will take place. This is invaluable, but it must not be taken lightly.  Once you start you need to continue to invest in the relationships even when there is nothing immediate to be gained.  Good Guanxi takes time and has many levels; it cannot be bought, it cannot be rushed and it cannot be forced.

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