Despite the fact that China has passed through a modernisation stage over the last 25 years, it can still be difficult to understand for a westener how to do business in China for the first time. Understanding and accommodating those cultural differences is primordial. One example is that business in China are based on relationships (Guanxi) as opposed to the western world where business transactions are based and primarily focuses on economics. That doesn’t mean that economics aren’t important. It means that collaborating closely with a Chinese partner like a factory owner on the details of a mutually beneficial business model can come only after the other party trusts the other.
What is Guanxi?
Informal networks, investing in relationships, calling in favours, underground economy, and so on. Guanxi is all of it and more. In fact it is a highly sophisticated parallel economy which subverts a totalitarian system and its bloated, politicised bureaucracy.
The term guānxi means RELATIONSHIPS or CONNECTIONS it’s composed by two characters:
Guān: to close (v) or barrier (n) and
Xi: to tie (v) or system (n)
Guanxi is deeply embedded in Chinese culture. It is more than just barter or exchange because these are usually one-off transactions.
Perhaps it would be more accurate to describe someone’s Guanxi circle or network as an intricate web of relationships. This web encompasses a person’s influence and obligations and can extend in an infinite number of directions. The relationships formed by these associations are generally considered lifelong.
Relationships in the inner circle are nurtured by the practice of reciprocating favours. This is a system of mutual obligation where, “I scratch your back, you scratch mine,” is the modus operandi. Favours can be called in at any time: from weeks to years to decades.
Two important facts to take in count
Guanxi is reciprocal: It doesn’t simply involve monetary transaction from one person to another for a favor.
At it’s core it’s characterised by activities of trust and reliability between people of success of all parties involved.
Guanxi is about building strong relationships, and strong relationships take time to be built, and time means money when talking about business.[/x_text][/x_column][/x_row][/x_section]