7 Answers On Guanxi For Your China Business

Guanxi is a very important part of life and business dealings in China because it helps you to move things forward. But do you know what guanxi is and how it works in your favour? Here are 7 essential questions and answers!

guanxi in China business
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1 – What Does Guanxi Mean?

Guanxi is a Chinese word that literally means “relationships”. In China, guanxi is used to describe the connection between two people, and it can be used to facilitate social exchanges. This term applies to all types of personal relationships, from family and friends to business contacts. These relationships have a profound impact on the way that people in China communicate with one another.

In Chinese culture, guanxi is a very important part of life and business dealings because it not only helps you get things done but also leads you to better understand other people’s perspectives. In China today, if you have guanxi with someone who has power or influence over your career, it can be a decisive factor in getting ahead in your field.

2 – How Do You Develop Relationships?

Two people are more likely to have a guanxi relationship if they share common ground. They might belong to an extended family, have the same place of origin, attend the same school or university, or have the same interests, travel experiences, or career goals. Additionally, mutual sympathy plays a role. In life, all guanxi connections, which have an intrinsic value, are kept permanently.

Developing relationships with Chinese business partners and sharing contacts through established guanxi networks are vital to gaining a long-term foothold in the market. The concept of guanxi is for Westerners often hard to understand, especially if they separate professional and private life.

China, however, a sustainable personal relationship must be established before joint business activities are even being considered. It also means that a personal relationship develops more in the private sphere. If interpersonal harmony is achieved here, the doors to business slowly open – and to further contacts in the respective guanxi relationship network.

Furthermore, the higher the hierarchical position of a new contact, the stronger the effect of guanxi. It is the goal of every Chinese to expand their network of relationships upwards. Chinese strive to increase their reputation and that of their entire family through valuable contacts.

Personal relationships within a guanxi network are therefore also called social capital. With a high number of connections, individuals can secure their standing. Those who have many upward relationships can also exert their influence.

3 – Can Foreigners In China Build Genuine Guanxi At All?

As a newcomer to China, building guanxi connections requires openness and a fundamental willingness to adapt to Chinese thinking and doing business. It is also a time-consuming and travel-intensive process.

However, it can be easier for foreigners to establish new business contacts in a targeted manner than for some Chinese, who must consider other factors, such as ethnic heritage, place of origin, province affiliations, and already existing network connections. And many Chinese see it as an advantage to have relationships with people from Western countries.

With little experience, guanxi networks can prove highly profitable for foreign business people, especially if many new customers or suppliers are introduced. The longterm leverage should never be underestimated.

4 – What Keeps A Guanxi Network Together?

Once you are a member of a Chinese network, it is important to cultivate and constantly expand the relationships in all directions intensively. You should help one another as well as solve problems together. 

There is always a reciprocation of favours shown, but not immediately and not necessarily by the same individual. Guanxi is not a purely two-person relationship but rather a network of connections between several people. 

The more you receive from someone, the more you owe that person or, by proxy, their closer contacts. The further away you are from a person in your network, the lower is your obligation to do that person a favour. However, helping your connections in some way is a given, particularly if you have closer contact with them.

In other words, guanxi is based on a constant give and take that extends over many, many years, many, many people, and also from the professional to the private sphere and vice versa. The mutual commitments and expectations between guanxi connections vary and are used for a wide variety of goals or problem-solving. 

Keep in mind that the Chinese also divide their relationships very precisely to assess the degree of mutual trust. Guanxi is also measured according to the resilience of the relationship and the obligations associated with it. Over time, reciprocal favours also intensify the dependence of people on each other.

5 – Do You Have To Respond To Every Request?

For many foreign business people in China, the guanxi game of favours and counter-favours poses a challenge, especially when favours are not directly related.

For example, when a contact introduces new clients to you and one of them then brings up the possibility of his niece being employed by your company, you might panic, especially when it becomes apparent that this recommendation of the niece is not due to her highly suitable qualifications but that your Chinese network partner is merely trying to do his guanxi connection a favour to compensate for an earlier favour.

As already mentioned, guanxi is not a pure two-way relationship. Often, favours are not directly linked. However, to refuse such a request once it has been made is seen as an unforgivable insult and can have serious consequences for your business success in China. Not only is the Chinese contact concerned at risk, but the word of a blunt rejection will quickly spread throughout the entire guanxi network. Therefore, it is crucial never to reject the request for a favour directly but either comply or offer other alternatives very diplomatically.

6 What Are Guanxi Middlemen Doing?

What keeps Chinese guanxi networks also flowing are the works of so-called middlemen. Their function is to introduce people to each other and then help both sides develop their basis of trust and initiate joint business activities.

Middlemen usually belong to the trusted circle of both sides and bring this in profitably for all. They pick up on both sides’ moods and eliminate possible differences by pointing out common ground more clearly. Business relationships established through an intermediary get off to a faster start because the recommendation stands for trustworthiness and reliability, which places the new contact more firmly in the existing guanxi network.

Intermediaries also come into play in the case of a conflict to mediate between the two sides. According to Confucianism, it is better to avoid or mediate a dispute than settle it openly in court, for example. Thus, good guanxi relations are more important than clauses on breach of contract.

7 – What Is The Difference Between Guanxi And Corruption?

While guanxi structures can certainly be abused, corrupt members within a guanxi network will ultimately be eliminated, as their behaviour runs counter to guanxi’s fundamental values and endangers the group’s greater good. For the Chinese, actively used relationships are considered natural and self-evident. Good guanxi connections are the result of extensive networking and are therefore a well-earned, valuable resource. Their acquisition brings prestige. Their misuse, however, is punished by the community. The gained social status is lost.

Moreover, with an increasing establishment of the rule of law and an active fight against corruption by the Chinese government, traditional guanxi relationships will be put in their place but certainly not lose relevance.

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