How is guanxi changing

Guanxi

What Is Guanxi?

Guanxi (pronounced gwan’ CHē) is a Chinese term meaning relationships; in business, it commonly refers to the networks or connections used to open doors for new business and facilitate deals. The term refers not just to the existence of relationships but to their nature: to having personal trust and a strong relationship. It can also create moral obligations and require the exchanging of favors. A person who has a great deal of guanxi will be better positioned to generate business than someone who lacks it.

Closely intertwined with the Confucian philosophy that has shaped many Asian cultures, guanxi holds that the self extends to family, friends, and society to create a harmonious community. Guanxi implies an obligation that one has to another. In China, the belief is that the wheels of business are lubricated with guanxi.

Key Takeaways

The exchange of favors between people in a network need not be the same.

Merely saying that guanxi connects to Confucian philosophy does not complete the explanation of the term. Confucian thought dates back more than 2,000 years and continues to be highly influential in China today. Given the importance of Confucian thought, it should be no surprise that its stress on relationships and duty to others should be reflected in the notion of guanxi in Chinese business relationships.

Business comes before the personal in the Western business model, and the two do not often combine. In guanxi, however, the two are closely joined. Indeed, the original Chinese symbols relate to the concept of a gateway to a relationship, a neat and relatively accurate way to think of guanxi. In other words, the exercise of guanxi leads to the connections through which business can happen.

How Guanxi Works

Guanxi is perhaps best understood by the old axiom, «it’s not what you know, but who you know that’s important.» Guanxi in the West comes in many forms—alumni networks, fraternity or sorority memberships, past and present places of employment, clubs, churches, families, and friends.

In social sciences, guanxi is similar to some concepts understood in network theory, such as the idea of information or connection brokerage by well-positioned individuals in a social network or their social capital.

Much of our lives today depends on networking, social networks like Facebook, business networks like LinkedIn. We are all building these intertwined networks of connections to improve our business lives every day.

Understanding Guanxi

The odds of gaining access to a business opportunity and then winning that opportunity are higher when you work your connections. If you are bidding for a contract in competition with others and know someone on the other side of the deal, naturally, you will try to utilize this contact to your advantage.

If you are a Wall Street executive with guanxi in Washington, you will undoubtedly make a few phone calls to make sure lawmakers remain at least neutral and regulators stay off your back. If you are a CEO who wants to make an acquisition, you will tap into your guanxi at the golf club to find a quicker route to your objective.

Special Considerations

Using your guanxi can be innocuous or hazardous depending on where you do business and how aggressive you are. Using connections may be commonly accepted as simply conducting business affairs in the West. Still, you must be careful of conflicts of interest, whether governed by law or a company’s code of ethics. You can face severe consequences if your networking abroad violates the Foreign Corrupt Practices Act (FCPA).

In China, where the art of guanxi occurs in high form, calling upon connections is the norm to get things moving. However, even there, one can go too far. Business leaders with guanxi in the government have engaged in illegal activity with dire consequences. Abusing guanxi is a terrible idea virtually everywhere.

What Confucian Beliefs Are Key to Guanxi?

Confucianism is founded mainly on the five relationships and their importance to the individual. It looks to create social harmony based on these intertwined harmonious relationships and mutual courtesy in a well-ordered world.

Is Guanxi the Same as Networking?

Networking and guanxi have essentially the same linguistic meaning. However, networking in Western business is a recent concept that lies relatively lightly in our culture. In contrast, guanxi sits deeply in China’s language and culture, forming the basis for virtually all social relationships.

How Do You Build Guanxi in China?

Building guanxi is usually a long-term process. Several techniques can help do so. You can begin by gaining knowledge about China’s history and culture. Seeking formal introductions to individuals with whom you want to do business is also helpful to start relationships, especially where you make a conscious effort to create trust and social contact. Finally, gifts and entertaining, especially dinners, are traditional Chinese methods of building social capital.

What Are the Downsides to Guanxi?

Because it is so dependent on relationships, guanxi taken to its extremes can cause cronyism, nepotism, and corruption. On occasion, illegal acts result from misapplied guanxi. Further, guanxi often ignores the qualification or merit of the individual favored. In other words, guanxi can lead to the less qualified person obtaining a position or deal, leading to a less productive situation for the business.

The Bottom Line

Understanding guanxi is essential to doing business successfully in China. Only by building social and business networks and contacts can a Western person fit well enough into the guanxi system to succeed.

Guanxi: The Chinese Cultural Concept

«Guanxi» (pronounced (jwan-see) is one of the most powerful forces in Chinese culture.

Though the direct translation of «guanxi» is «relationships», the concept as it is used and applied in Chinese culture is much richer and encompassing.

«Guanxi» expresses the relationship of one person to another, or one party to another.

However, more importantly the term also expresses an obligation of one party to another, built over time by the reciprocation of social exchanges and favours.

If one has «guanxi» with another, one will be quick to do a favour, act on another’s behalf and depending on the depth of the relationship, do anything necessary for the other party.

By establishing this type of relationship with someone, the other party is implicitly agreeing also to be available to reciprocate when the need arises.

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How Does Guanxi Work?

In such a way «guanxi» can be considered as a type of currency that can be saved and spent between the two parties.

Like money, it is a resource that can also be also be exhausted, so one must be sensitive not to overextend the «guanxi» that has been established.

The exchange of favours does not have to be in like kind. So if one person helps introduce you to someone, it is not beyond the scope of the relationship for that party to then ask you to help get a visa to your country, or get their son into a foreign school.

Failure to repay favours in this type of relationship is equivalent to not paying a financial obligation. If one cannot accommodate a specific request, one must find another way to make amends, perhaps by sending along a small gift to let the party know you are sorry you could not help and that you still want to maintain the relationship.

Did you know The Business Culture Complexity Index™ ranks China as the 20th most difficult business culture in the world?

Guanxi and breaking local connections has a lot to do with it!

Why is Guanxi Important?

The reciprocal nature of «guanxi» and its implied obligations is the main reason why Chinese are reticent to engage in deeper relationships with people they do not know.

To begin such a relationship may put you in a compromising position from which it is difficult to withdraw.

Additionally, to establish «guanxi» with someone who later proves unworthy will also tarnish that party’s reputation (or lose face), so the Chinese would rather not begin a relationship with someone they do not know.

Finally, in establishing «guanxi», that person or party may want to know up front what they hope to gain from the relationship, to insure they are not contributing effort or services without gaining something in return.

Given this background, if you would like to begin a relationship with a Chinese individual, group, or company, it is most expedient to be introduced by a mutual party who can vouch for you. But note that the intermediary is also expending «guanxi» to make the introduction so you will need to repay the favour.

Gifts should always be reciprocated and be of equal value. Always give and receive with 2 hands.

Photo by US Army Band on Flickr (CC BY.20)

Gift Giving and Guanxi

Gifts are often used in «guanxi» to establish, or bring equilibrium to the relationship. If one is feeling too indebted to another, that person may bring a gift to bring the relationship back into balance.

Also, if one feels that they have offended a party, or if they would like to increase the strength of the relationship to then ask a favour, they may give a gift. If you receive a gift from another, you do not necessarily have to return a gift, especially at that time. Try to determine the reason for the gift so that the problem is not further exacerbated.

If you just brought a new customer to a business, the gift will be in response to favour. If someone had to back out of a deal, the gift will be an appeasement.

However, if someone is trying to curry favour and you do not want to be engaged, quickly return a similar gift and you are released from that obligation.

Not all gifts have elaborate motives behind them; often people are simply expressing gratitude for your presence or friendship.

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What is 关系 «Guanxi»?

“Guanxi”(关系 guānxì) cannot be directly translated as «connections» or «networking» because of its deeper implications in the Chinese business world, as well as in Chinese society as a whole. While «guanxi» is an ancient and complex aspect of Chinese society that makes doing business in China seem intimidating, forming «guanxi» relations can be as simple as spending the time to get to know your business partners on a personal level. Having good «guanxi» is essential to doing long-term, profitable business or having a good career in China. In consideration of the importance of «guanxi» to business relations, let’s look at six key aspects of «guanxi» that will help you understand how to intuitively feel your way through relations in China.

History of «Guanxi»

The modern-day practice of “Guanxi” reflects on thousands of years of business culture in China. Some historians argue that China experienced the first industrial revolution in the 12th century, during the Southern Song Dynasty, when steel production equaled that of late 18 th century England and joint-stock companies appeared, 500 years before the Dutch East India Company sold its stock on the Amsterdam Stock Exchange. Long since the days Song Dynasty Emperors peacefully ruled from Hangzhou, the Chinese business community has gone through many episodes of political turmoil, relying on personal associations of trust and cooperation to cope with times of instability. In modern China, these traditions persist as an informal system for creating trust and confidence in the Chinese business world, where laws are less formally observed than in the West. «Guanxi» is the reason many informal business activities like shadow banking are able to exist as a potent force in China’s modern economy.

“Guanxi” Isn’t All About Money

While some Western business professionals might have some apprehension regarding the different business customs in China, building “guanxi” is very similar to making friends. Especially in the initial stages of a relationship, you won’t be asked any huge favors, and the task at hand is simply to get comfortable with potential partners or clients. If you like drinking, meeting your business partners could be very enjoyable because newly acquainted people usually build trust by demonstrating eagerness to consume alcohol with one another. Leave the «business first” mentality behind, and just relax and enjoy the break from normal office culture.

“Guanxi” Entails Obligation

Chinese business culture revolves around trust, and reciprocity is essential to developing a credible reputation for yourself and your organization. Know that for every favor you receive, you will have to return a favor. Sometimes this will mean that if someone has given you a gift, he is hoping you will do them a favor in the near future. Failure to return a favor is a serious violation of trust, so should you receive a gift with the expectation that you will fulfill a request which you cannot accommodate, then you can quickly return a gift to the sender. In this situation, sending a gift to the other party as an apology or appeasement statement lets them know you would like to maintain the relationship. When relationships are developing smoothly, t he exchange of favors does not have to be in kind, and favors do not have to be returned immediately. Again, acts of «guanxi» should be diverse, and appear to be voluntary.

To operate successfully in China, you will have to adopt a “you scratch my back, I’ll scratch yours” mentality. However, you should also be careful not to engage yourself in situations where you would not want to do the other party a favor. Chinese business people are reluctant to establish relations with people they or their relations don’t know. Once you enter into a relationship with someone, you are obliged to return favors. It is therefore important to be aware that in some cases, «guanxi» relations are one-sided, and adequately returning favors in this context may result in you receiving an invoice for twice the amount you had anticipated. Take care to listen to your Chinese business partners to gain a clear understanding of what it is that they are looking for. It might be necessary to have a local Chinese person guide you through «guanxi» decisions if you aren’t able to discern what the other party wants yourself.

“Guanxi” is Built Over Time

Chinese business people are reluctant to establish relations with people they or their relations don’t know, and their view of business relationships is much more long-term. In order to be successful in China, you will have to meet partners more than two or three times outside of work, and maintain the gesture of friendship throughout the whole business deal. Doing business abroad can be unpredictable, so good “guanxi” is what businesses need when the time arises. Like good friends who stick it out through thick and thin, “guanxi” relations have a way of coming to each others’ aid in a timely manner, so it’s a good idea to not give up on any particular relationship. If you are trying to build relations within a particular industry, but do not know anyone in that industry, for example, your immediate relations and friends could prove valuable in connecting you with someone who can help. Try to establish frequent contact with anyone who is already in your network, as it is difficult to build “guanxi” without somehow already knowing somebody along the line.

“Guanxi” is Built on a Network of Relations

Due to its being directly translated as «connections,» “guanxi” is often misunderstood as the relationship between two people, when it is really better understood as the way that a web of relations or circle of influence impacts relations between two people. “Guanxi” developed as a network of trust based on the concept of face, which decides how much influence a particular individual has on the group. The concept of face helps to maintain trust and social order through networks of “guanxi” because if favors are taken advantage of and not returned, the offender will lose face with all members of the network. A breach of trust is an offense to the group just as it is to the offended individual, and could result in complete ostracism. In a BBC documentary on Chinese “guanxi” in business, one businessman describes “guanxi” as a social netting which functions in the same way as professional organizations and social programs in the West do.

“Another reason our business people connect together is that in China, the social systems, the government systems, are not really ready to support you. So what we are doing is helping when we connect together. It is easier for Chinese people to make friends because we do not really have too much privacy in our lives. Not like you, you always want to protect your privacy; we don’t want to.”

Actions Speak Louder than Words

While it seems that business is all about who you know in China, the small talk and courting stage of relationships are transient compared to the actual favors that are exchanged between partners. As another businessman interviewed in the BBC documentary put it:

“’Guanxi’ is thoughts and communication, but at the end of the day, it’s actions. It’s really like (being) the first person to put money in the bank. And it may be saying something nice, it may be doing something out of your way, and it may be when you’re in a deal together, you make sure you don’t take the last dollar off the table. The actions that you do, they mean even more than words and thoughts.”

As a Chinese businessman explained to me, the strength of “guanxi” is in the trust that exists between business partners, who are often very good personal friends. The value of deals he and his friends strike, he claims, would make their Western counterparts raise eyebrows at the amount of risk involved. But he and his friends can handle large deals which would be out of their league in other countries because they trust each other, and have known each other for years. While foreign companies are at a disadvantage coming into China without the stability enjoyed by partners in long-term relations, at the end of the day, Chinese companies are practical and will want to do business with you as long as you are bringing real value. Make sure to follow through with a gesture of goodwill during negotiations after initial pleasantries, and the long-term benefits will show.

Chinese Guanxi: The Oil That Keeps China Running

June 23, 2020 By China Mike

Guanxi is a term that defines the complex concept of relationship in China. By building and maintaining guanxi with personal contacts and business partners, you ensure a positive and stable relationship. Essentially, it is the oil that keeps the China motor running.

P erhaps nowhere else on the planet does the phrase, “It’s not what you know, it’s who you know” have more relevance than in China.

“Guanxi” (关系, pronounced “gwan-shee”) is usually translated as “social connections” or “relationships”. But these don’t tell the whole picture.

Guanxi is the key to getting anything done in China—the single most important factor for success in the country. The Chinese widely believe that it trumps intelligence, knowledge, talent, ambition…and even wealth.

Without the right guanxi, it’s hard to get ahead in China—competitors with better guanxi, for instance, can block you at every turn.

To get anything done in China, you need to navigate through China’s vast bureaucracy—dealing with all kinds of public officials, agencies and businesses.

Guanxi isn’t just for getting ahead in business and politics. It’s how things get done in China

This includes everything from getting help moving to meeting a potential spouse to finding a new job or apartment. For better or worse, guanxi is the oil that keeps wheels of commerce, politics and society in general running in China.

Guanxi: Mutual Dependence (i.e. Obligation)

When you boil it down, guanxi is a system of mutual obligation—one that has been described as “relationships based on mutual dependence.”

A simpler way of putting it is that it’s based the idea of “You scratch my back and I’ll scratch yours”.

Deeply embedded in Chinese culture for millennia, this intricate web usually consists of:

But it’s not just about your own influence and contacts. Because relationships are nurtured through reciprocating favors, this means that guanxi also encompasses your personal obligations or “social debts”.

The Idea of “Social Debts”

In China, it’s not just who you know.

It’s also how others in your network see their obligations to you.

Every Chinese person maintains a kind of ongoing mental abacus that remembers all of the favors that they’ve provided…as well as all of the debts that they’ve accumulated.

Traditionally, these relationships are generally considered lifelong. You could lose touch with someone for years—even decades—after gaining your initial favor and that person can still call in a reciprocal favor out of the blue.

In such a system, failing to return a favor is a major moral transgression—almost a mortal sin in the eyes of the Chinese.

Those who gain a bad reputation are quickly voted off the island, so to speak; they can find that whatever guanxi power they’ve built up has rapidly evaporated.

Foreigners in China: Building Guanxi?

Westerners sometimes have a problem with this idea—complaining that it’s unfair and underhanded.

The guanxi system seems to go completely against the Western mantra of taking personal responsibility for your own actions (as well as success and failure). Reflecting a strong sense of independence and individualism (“I did it my way”), many feel that seeking and depending on connections is not the “Western way”.

But in general, you don’t hear the Chinese complaining that “life isn’t fair.”

Indeed, since the dawn of ancient China, there was little that was fair in Chinese society. Throughout Chinese history, the prevailing motto has been “might equals right”.

The common man had little personal freedom and lots of rules and laws to follow. Unlike Western cultures, ordinary people in China had no inalienable rights to protect them from people in power.

For thousands of years, bureaucracy was universal and honed to perfection. In short, no one expected to get their way because it was “right” or “fair”.

In fact, laws in China were usually designed to serve those in power (and honestly…has that really changed?).

They were often arbitrary and ever-changing (depending on whichever dynasty/egomaniac was in power at the time). While Western societies developed to be legally based—with the rule of law enforced fairly, more or less…

…Chinese society was controlled by the capricious rules of those in power.

Using Bribery in China: Acceptable?

The upshot is that the Chinese have always relied on working around the system to get things done. This meant using connections and making deals behind the scenes (using bribes if necessary).

The Chinese have a term for it: 后门, or hou men, which literally means “back door”.

In such a system, relationships take on a greater importance. In general, the Chinese respect real relationships more than artificial rules.

This helps explain why the Chinese tend to flaunt the rules. I’ve used the example of Chinese men smoking in No Smoking areas many times before because it’s the most visible (and annoying) to many Western tourists visiting China.

I’ve seen men smoking inside the ancient Forbidden City (made up of wood), despite No Smoking signs everywhere. I’ve seen policemen and other officials lighting up right next to No Smoking signs.

Cost of Doing Business in China

In a society where “guanxi” and connections take on such an important role, the typical Western way of doing business is usually ineffective (and can even be considered arrogant or rude).

It’s no secret that foreign business people in China need to cultivate guanxi as quickly as possible. Western business people learn pretty quickly that going through the “official” channels to navigate the Chinese bureaucracy is an exercise in futility.

Even something as seemingly easy as getting an application rubber-stamped can be a long and frustrating process without the proper guanxi.

Some might even go so far as to say that China’s vast bureaucracy is virtually impossible without the right guanxi.

On the other hand, when dealing with anything requiring government approval, the people with right connections can get around virtually any official regulation.

To get things done, you need a Chinese partner who has the right guanxi (one who you can also trust….a big question mark).

For instance, it’s common for business people operating in a certain region to hire a relative of a powerful local official to grease the wheels of commerce.

Word of Caution with Guanxi

Foreign ex-pats and business people shouldn’t take this guanxi thing too lightly.

The main point is to remember that when someone is doing you a favor, they’re not necessarily just “being nice”. There may be an implicit agreement that you’ll someday scratch their back.

So understand what you’re getting yourself into before you get locked into a never-ending cycle of giving and returning favors.

Try to understand the full implications of accepting a favor, especially a big one. Your Chinese friend may assume that your country operates on a similar guanxi system; they might assume that you have some pull back home to hook them up in the future.

Be wary of building up a bank of obligations.

For instance, I’ve heard of stories where a Chinese friend asked an American friend to use their connections to help get their kid accepted into a university or help get their travel visas approved. So unless you work for the Admissions Department at Harvard or at the U.S. State Department, you probably want to avoid their disappointment when they learn you don’t have the ability to do that.

Instead, the goal is for you to stay even—whether in your business or personal life. Be wary about building up bank of obligations.

Perhaps a good motto for long-term residents in China to live by is “There’s no such thing as a free lunch”.

Chinese Banquets and the Art of Relationship Building

Needless to say, the Chinese spend a lot of time, energy, and money in developing and nurturing connections. Many invest decades—a lifetime even— in building up their network and extending their influence.

And the most common bonding experience in China to cement a new relationship is the banquet dinner.

For instance, after a businessman uses his network to get introduced to a local official, he’ll typically start the relationship by treating him to a fancy dinner. The banquet consists of a never-ending procession of dishes coming out of the kitchen (along with plenty of booze).

Afterwards, the businessman might even take the official to a karaoke bar, where additional “favors” are doled out. A traditional invite often included the phrase “yan jiu yan jiu” (literally “smoke alcohol smoke alcohol”) indicating that the guest will also leave with parting gifts (expensive cigarettes and liquor).

The banquet dinner is an all-purpose Chinese bonding experience, not just to bribe officials.

It’s also the primary mode of social interaction among the Chinese, whether bonding with new friends, repaying a favor, or just keeping up good relationships. Older relatives are supposed to treat younger ones, though friends naturally take turns picking up the bill (qing ke, or “being the host”).

Weddings in China are centered on the banquet dinner. Unlike many Western weddings (church, reception, dinner, dancing, drunken groping, etc), Chinese weddings are almost always held in large banquet halls or restaurants.

Guests are assigned seats at circular tables….and sit there for the entire wedding. Dishes are slowly served throughout the event—mixed in with the actual “ceremony” (usually an introduction of the bride, groom, parents, along with some speeches).

Later, the bride and groom slowly make their rounds to toast and thank each table for coming….and the whole affair is over in a few hours!

One thing that struck me was how little the guests mingled. In general, the Chinese (and Taiwanese) are reluctant to just introduce themselves out of the blue—they like to wait for a third party to do it (which is related to this Chinese concept of In and Out groups).

Instead, guests were assigned to tables according to the bride and groom side, with each side talking among themselves.

Since we’re talking about guanxi, I should also note that wedding gifts also reflect this mental accounting list (perhaps a bit too transactional for Western tastes).

As each guest arrives, they check in by giving their wedding gift (a red envelope stuffed with cash). A relative takes it and records the gift so that everyone is clear on the amount of commensurate guanxi that has just been accumulated for future reference.

Chinese Nepotism and Corruption

The guanxi system is certainly not without it’s downsides.

The Chinese are not shy about their connections. On the contrary, they’re usually proud that they know people in power.

One negative consequence is nepotism, which continues to be rampant in China. Pervading all aspects of business and government, many jobs filled based on family ties, not merit—undermining a system based on merit and scholarship.

For instance, it’s commonly accepted that you can get your kid accepted into the most prestigious universities with the right guanxi. I recall reading a story about how a certain small high school in Nanjing only had three seniors accepted into university; none of the three was even close to the top of their class.

Similarly, cronyism and corruption are harder to eradicate in a society that has long operated on the basis of personal relationships and back room dealings.

How the Internet is Re-Shaping Guanxi

Some good news though. In the age of the Internet—despite government censorship—justice sometimes prevails in China, even for those with big-time guanxi.

Way back in October 2010, a famous hit-and run case occurred in northern China that exploded into an online scandal known the “Li Gang scandal”.

The case involved 23-year old Li Qiming, the rich, spoiled son of Li Gang, a powerful deputy police chief of the district.

Driving around Hebei University after some hard partying, the drunken Li crashed into two female students. One was seriously injured and the other died from her injuries the following day. After a crowd and security guards managed to stop him from fleeing the scene, Li shouted…

“Go ahead and sue me if you dare– my father is Li Gang!”

After government censors tried to block the coverage (worried about the abuse of power angle), the story went viral online. There was so much public outrage that days later, the father and son were giving effusive apologies on CCTV, China’s national network.

In addition to having to pay significant compensation, Li QiMing was sentenced to six years in prison.

The phrase, “My father is Li Gang” has become something of a bitter inside joke in China and a catchphrase for shirking any responsibility — washing the dishes, being faithful to a girlfriend — with impunity.

What is Guanxi – Relationships in China

T he phrase “it’s not what you know, but who you know” is well known in Western business circles due to the fact that having the right contacts can provide a great deal of assistance in advancing one’s career and closing important business deals. This idea takes on a much greater significance within China, in which business organizations and social circles are often nepotistic in nature. That is, relationships do not merely supplement an individual’s effectiveness in business and dealings in everyday life; instead, relationships form the foundations upon which business and society are built upon.

Many Chinese business people rely almost exclusively on their personal relationships when conducting business, and protect their networks with a level of devotion rarely seen in Western countries. In the following article, several key aspects of relationships, or guān xì (关系), in China will be explored with the goal of acquainting the Western business person with the basic fundamentals of how relationships work in China, as well as how to build successful and fruitful relationships with the Chinese.

The Cultural Roots of Relationships in China

From a cultural perspective, Confucianism (a 2,000-year-old Chinese philosophy) places a strong emphasis on observing the proper relationships as the key to social harmony. The key “Five Relationships” stressed in Confucianism (as well as in Filial Piety, an important concept to the Chinese family) place importance on each citizen in a nation knowing their position in society and understanding the expected behavior inherent to that position. The specific relationships include:

Four out of these five relationships are solely related to family and close friends; it is therefore not surprising that many, if not all, of Chinese guān xì networks are composed of friends and extended family, especially among local businessmen in China’s interior. From a geographical perspective, the large size of ancient China, coupled with difficult terrain made long distance travel next to impossible before the arrival of modern transportation.

“Your network of “relationships” is like a bank, “face” is the money, and “giving gifts” is the way in which you conduct your deposits and withdrawals.”

– James Tan, Sales Manager, Manufacturing Industry, China

Chinese culture has also long placed an emphasis on revering, and to a degree, worshiping one’s ancestors. Key to this concept is that in order to properly revere their ancestors, the Chinese found it necessary to regularly pay their respects at the graves of ancestors, or at the ancestral shrine located in the home. These factors led to generations of a single family largely staying in the same area with little migration to other parts of the country. The results of these geographical factors are that many personal and business networks were and continue to be strongest at the town, city or provincial level.

Relationships in China Today

Due to the autocratic nature of Chinese governing systems and methods, there has always been a lack of fair and reliable social and legal institutions within China. Because of this, Chinese people today often feel that they are only really able to truly trust and rely on their closest friends and relatives. For example, as opposed to the relatively fair and impartial courts that exist in Western countries, in China judges can be easily be influenced (or given orders) by high level officials (or influenced by said officials friends). Thus, when forced to contend with the high-powered guān xì networks of others, in China one of the only defenses is to develop a strong network of one’s own.

In addition, unlike as in the West, most Chinese business people are not accustomed to “business only” relationships. Rather, they prefer to create a friendly and personal relationship first, and then conduct business afterwards. And aside from cultural preference, there is a strong business reason for doing so. Despite the fact that almost every company will sign a contract at the commencement of a business deal, the actual ability of a company to enforce said contract is many times low, especially for smaller companies. China’s ineffective legal system can take years to successfully resolve cases, and many Chinese firms don’t have the time or money to wait for a favorable resolution. By focusing on developing a strong relationship first, as opposed to a formal and tightly worded contract, local Chinese business people can more easily be assured of a long-term and profitable collaboration.

Advice for Westerners

For the Western businessman new to China, it is useful to remember that your Chinese business partner will likely want to get to know you first before cooperating. This process can take anywhere from a few weeks to a few months, so it is important to allow enough time and not simply expect to arrive in China and sign a contract. And while it might be possible to get around building a relationship in some cases, engaging in the process with a Chinese business partner will help assure them that both parties can and will share a common ground and understanding.

“Sometimes a person’s personal network is natural, consisting of relatives and old classmates; however creating a relationship with a stranger requires an emotional and financial investment. For example, if I go to the Public security Bureau to apply for a passport, the normal process is 10 days – however if I have a relationship with someone at the Bureau, then I can receive the passport on the second day.”

– Michael Qin, Manager, Energy Technology Industry, China

Thanks for reading!

Do you have any more questions on how relationships work in China? Can you share any experiences you have had in China with relationships? Please feel free to post your thoughts in the comments section below.