What is Guanxi?
"Guanxi“Guanxi” literally means "relationships", stands for any type of relationship. In the Chinese business world, however, it is also understood as the network of relationships among various parties that cooperate together and support one another. The Chinese businessmen mentality is very much one of "You scratch my back, I’ll scratch yours." In essence, this boils down to exchanging favors, which are expected to be done regularly and voluntarily. Therefore, it is an important concept to understand if one is to function effectively in Chinese society. ( Traditional ChineseTraditional Chinese characters first appeared with the emergence of the clerical script during the Han Dynasty, and have been more or less stable since the 5th century (during the Southern and Northern Dynasties.) The retronym "traditional Chinese" is used to contrast traditional characters with another standardized set — Simplified Chinese characters, introduced by the government of the People's Republic of China or Mainland China in the 1950s. Traditional Chinese is currently used in the Republic of China or Taiwan, Hong Kong and Macau. Overseas Chinese communities generally use traditional characters, but simplified characters are often used among mainland Chinese immigrants. However, the majority of the Chinese-speaking world uses Simplified Characters. 關係 / Simplified ChineseSimplified Chinese Characters (simplified Chinese: 简化字; Traditional Chinese: 簡化字; pinyin: Jiǎnhuàzì or simplified Chinese: 简体字; traditional Chinese: 簡體字; pinyin: Jiǎntǐzì) are one of two standard sets of Chinese characters of the contemporary Chinese written language. They are based mostly on popular cursive (caoshu) forms embodying graphic or phonetic simplifications of the "traditional" forms that were used in printed text for over a thousand years. The government of the People's Republic of China has promoted them for use in printing in an attempt to increase literacy. They are officially used in the People's Republic of China or Mainland China, Singapore, Malaysia, and the United Nations. 关系 / guānxi)" is a general Chinese term used to
describe relationships that may result in the exchanges of favors or "connections" that are beneficial for the parties involved. Sounds like a simple way to create business right? The truth is this type of relationship can become somewhat time consuming and complex.
The Chinese term "guanxi" can, at times, equal the term "networking." The elements of exchanges based on "guanxi" carry a long tradition in doing business in China and Chinese communities. Good "guanxi" can be the key needed to opening doors otherwise closed. The types of relationship building are almost unlimited but exclusive. Not creating situations where others may "lose face (丟臉 / 丢脸 diūliăn)" is an important balancing act that those taking part must be constantly aware of. So good "guanxi" can be created in many ways and should appear to be offered voluntarily. Good "guanxi" can minimize natural or manmade obstacles in doing business in China. Over time it may take some effort to maintain and nurture the needed amount of "guanxi" to do business at different levels. Remember that good "guanxi" can mean more than just going from the back of the line to the front. Those taking part in the acceptance of "guanxi" are required to return "guanxi" given measured on the amount of previous "guanxi" accepted.
In simple terms "guanxi" appears to carry an element of trust. It's true that a lot of business in China revolves around circles of personal and mutual trust. So for any outsider to do business in China they must take the time to form relationships or "guanxi." 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. I call this "relationship after service."
Now that we have a general idea what "guanxi" is, how can good "guanxi" be created and maintained? Most western educated businessmen think that this kind of relationship is only based on direct cash exchanges. Although this is correct on some levels it isn't the norm today. Often "guanxi" transactions are "hidden" and not made obvious to the casual observer. Although the direct giving of "gifts" is a common form of building "guanxi" it isn't the only way. Inviting or hosting dinners for prospective clients or business partners can create an environment for "guanxi." Also the exchange of favors or "inside information" may amount to good "guanxi." However, not all "guanxi" is good "guanxi." Relationships built on "guanxi" can quickly fade or disappear if part of the "relationship chain" is put into question for any reason. There is a fine line between "guanxi" and bribery. The path to good "guanxi" isn't an easy path to follow. Tipping to one side can put relationships made in this way a case for legal action. As China is creating its own terms for capitalism and legal business transactions the distinction many not become any clearer. So creating "guanxi" is like walking into a thick mist where you constantly have to feel your way through.
How much guānxi do you have?