China business primer

"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 (family, business etc)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.

In China it is the right "Guanxi" that makes all the difference in ensuring that business will be successful. By getting the right "Guanxi", the organisation minimises the risks, frustrations, and disappointments when doing business here often it is acquiring the right "Guanxi" with the relevant authorities that will determine the competitive standing of an organisation in the long run. Moreover, the inevitable risks, barriers, and set-ups you'll encounter in China will be minimised when you have the right "Guanxi" network working for you. "Guanxi" is vital to any successful business strategy in China.

"How do I get it?"

First of all, it does not have to be based on money. Treating someone with decency while others treat him/her unfairly could result in a good relationship. Second, it starts with and builds on the trustworthiness of the individual or the company. If a company promised certain things and delivered as promised, the company is showing trustworthiness and the Chinese would be more inclined to deal with them again. Third, being dependable and reliable definitely strengthens the relationship. It is like being friends, and friends can count on each other in good and tough times.

IMPORTANT: This means that a great deal of business is not done on merit. It is done on favoritism and has added greatly to the large number of quality problems that Chinese organizations face. The negative effects of Guanxi will become increasingly apparant as Chinese organizations scramble to compete on an increasingly level playing field with more meritocratic organizations. It is unusual to find a business managed by a qualified managemnet team; the majority have a position simply because of thier relationships. Since "Guanxi"  functions as an information network, companies with wide "Guanxi" and relationship networks often have much higher performance than companies with little or no relationships. Organizations that do not spend considerable time and energy drinking, socialising and "giving face" will be unlikely to get very far with the Chinese.

 china business

- Posted by James Nash - 5:57:04 PM - Comment? Rules: Criticize ideas? Yes. Criticize people for holding those ideas? No. []