If you are operating within the Chinese market, you are acutely aware of the concept of Guanxi and its integral role in success. Whilst the strength of your relationships and wide-ranging network is considered important within Western cultures, Guanxi surpasses this. It is woven into the very fibre of Chinese culture as described in intrinsic detail throughout this three-part series.
Guanxi refers to the quality of an individual’s relationships. It also refers to the trust they gain by fulfilling their obligation to family, friends, acquaintances and business contacts. As such, individuals within businesses are typically assessed by their wider circles- based on their business conduct. These actions form personal relationships in place of a written, formal contract. In many ways, it represents what the British would recognise as a ‘gentleman’s agreement. While these two concepts have recognisable traits, a gentleman’s agreement does not impact your standing within your network. Guanxi does.
Many professionals wish to branch out in China- and for a good reason, The opportunities are rife. However, to be successful, you need to understand Guanxi and how being viewed as ‘good’ or ‘bad’ within this construct affects your dealings.
The most crucial aspect of Guanxi is trust. To form a successful business relationship, both parties must trust each other. It can be challenging to achieve this mutual trust if you are unfamiliar with Chinese culture and business methods. However, you can start forming the basis for trustworthiness by adhering to the cultural customs detailed in the five steps below:
- Respond to favours through acknowledgement, appreciation and action
Like Guanxi itself, favours make up yet another massive component of the fabric of corporate culture within China. However, you must pay attention to when these favours occur because they might not be apparent. This trap is easy to fall into when migrating your business to China from a western country. However, the effects can be detrimental.
Many Western professionals are familiar with the expression: “This one is on me!”. This statement alerts you that there is an expectation for reciprocity. For example, this repayment could mean fulfilling a commitment or closing a deal on behalf. Conversely, favours and business transactions are often not associated with strengthening Guanxi.
Understanding this nuance can be critical to you obtaining the Guanxi required for your success. The best way to respond to any favour is to recognise the act, show appreciation, and then react comparably. For example, if a business contact pays for dinner, you must reciprocate promptly by paying for a similar activity.
- Be in it for the long haul, and don’t look for a quick win.
There are many examples within the business archives of individuals that thought they understood Guanxi. Some even felt they had gone ‘above and beyond to secure business within China. Forbes Magazine cites the case of an American manufacturer that relocated a senior director to Guangzhou. This manufacturer orchestrated the move to improve the company’s topline whilst simultaneously cutting costs. The director knew this was a make-or-break situation for his career. He wasn’t entering completely blind- he had some Chinese cultural experience due to previous trips. As such, he started mandarin classes to better his chances of success. However, it appeared that this was to no avail, as a year later, the results and morale of the China-based team had seen little improvement.
The reason for this outcome was simple. The director felt his work was complete after learning the language- without understanding the true meaning of the terms he learnt. As a result, he was too transactional and “in it for himself”. A ripple effect ensued, and this bad Guanxi subsequently blocked any further business transactions. So take heed. Take your time, and don’t look at the quick wins. China is a long-term investment, so your commitment to understanding the landscape should be too.
- Business relationships should be as meaningful as family relationships.
Family is a fundamental aspect of Chinese culture and is embedded in all interactions. This value is integral to building your personal Guanxi ‘network’. However, unlike Chinese professionals, ex-pats cannot engage family members as an instant connection. As a result, you will need to deploy the principles of familial relationships in Chinese society in your business relationships. For example, when dealing with someone more senior or slightly older than yourself, you must show exceptional respect for their seniority. Particularly if you wish for them to co-operate with you from a business perspective. Whilst this may not align with Western culture, in China, you must be mindful of these critical relationships: father-son, elder brother-younger-brother and husband-wife (the former being the superior, commanding respect and the latter adhering to this).
- It pays to be nice.
Chinese culture relies upon the principle of trust, which one can gain through something as simple as a thoughtful gesture. Knowing those around you will enable you to offer simple things that will positively impact your Guanxi. A good example would be – you overheard one of your superiors explaining they will be away long term whilst caring for an elderly family member, and he has a cat which will require feeding. As they are travelling as a family, her partner will be away with her, and no one will be around to feed their beloved animal. You can offer your time to support your colleague in looking after their cat, alleviating stress and concern. Whilst the colleague will likely decline, they will not forget the respect you have demonstrated.
- Never break a promise (Never make a promise you cannot keep!)
This concept is crucial throughout many parts of the world and is essential in almost all relationships, including business ones. However, breaking a significant promise in China can go far beyond people muttering behind your back at the water cooler or giving a sideways look when you approach them. If you break a promise within the Chinese culture, you have condemned your ability to gain good Guanxi and tarnish the reputation of those associated with you. As such, we recommend you install an ethos at the roots of your conduct within China. So if you say you’re going to do something, do it. If you set a deadline, hit it. If you set up a lunch date with someone, meet them.
The bigger the promise, the more significant the impact on your status; as such, you need to understand what you can and can’t deliver on.
So as you can tell, Guanxi is an integral way in which you build your reputation in China. It is at the heart of building solid, long-term relationships with clients and partners and is a practice you should commit to when living or working in China to ensure more successful business transactions. By keeping your connections and their needs at the forefront of your mind, you can create a sense of rapport that will make them more likely to help you and your business in return.
Guanxi takes time and dedication to master if you are not familiar with Chinese culture, so it is vital to your success within China that you become well acquainted with it. Ben King, Kinyu CEO, acknowledges: “ I was lucky enough to have my friend and business associate who was Chinese and had an existing network of contacts. Gradually, we began to develop relationships with key individuals in our sector. As our Guanxi networks grew, so did our business. As a result, we were able to win contracts and access new opportunities that would otherwise have been out of reach.”
An article released by Forbes states: “Last year’s study drew from exceptional data on 700 Chinese entrepreneurs, analysing their social networks (Guanxi) and its impact on their business success. The paper stopped short of stating that Guanxi causes business success in China”. Forbes continues to summarise that higher trust and connectivity directly correlate to business success.
To understand how Guanxi will impact your business success within China, book a consultation with Ben, CEO of Kinyu Supply Chain Management, by using this link.
