If you’ve spent any time in China, or even looked into the culture from a distance, you’ve probably heard of guanxi. The literal translation is relationships, or connections, but neither really conveys the importance of guanxi for all aspects of life in China.
Networks
A basic element of guanxi is the concept of networks, of mutually beneficial relationships. While this makes sense to most Westerners, what they often miss is that guanxi entails not just networks, but also personal obligations. It tracks the balance of favours between specific individuals, almost like having a set of ‘goodwill accounts’. So if someone introduces you to a good business contact, you now owe them a goodwill favour, but not necessarily a business-related one. You might do something more personal, like coaching their child in English or helping get a travel visa, for example.
The important thing to note here is that you can’t separate your relationships into ‘business contacts’ and ‘friends’ in the same way a Westerner might – in guanxi the boundary is blurred. Once you understand this, it’s easier to see why the Chinese want to get to know you before entering into a business relationship, rather than after. For them, the relationship isn’t ‘just business’. It has guanxi, and they might end up with personal obligations they need to fulfil. So they need to get to know and trust you first.
Compliance
Another point to consider is that guanxi in some ways replaces Western society’s reliance on law to ensure all parties stick to an agreement. Everyone’s networks are interconnected and if you abuse the trust of one person, the rest of your network will see that. It’s like an extreme form of social pressure, or an honour code. Consider this story from Andreas Laimboeck, CEO of Live the Language (LTL) Mandarin School:
To sign the company’s first distributor in China required six months of work, negotiations and guanxi building. At the meeting to finalize the deal, the distributor looked at me and asked: “Everything in the contract as we had discussed?” I said: “Yes”. He took his pen without reading it through, signed it, then tore it up and gave it back to me with the words: “We trust each other.”
There are some who say only the native-born Chinese can understand guanxi. There are others who say Westerners can get the hang of it. But there’s pretty general agreement that to have really good guanxi, you need to be on the ground in China, with a long-term presence. And to that end, Hornet have our own offices, with our own staff, building and looking after our guanxi every day.
Want to know more?
Follow these links for more information about how guanxi works and some practical guanxi tips.