Is your company thinking of entering the Chinese market? Or have you already set up shop in this growing economy and are have a hard time understanding some of the business dynamics around you? Quanxi is one of the most difficult concepts for people outside this Asian market to understand — and yet it is a vital component of doing business in China.
What is Guanxi?
Guanxi is the system of social networks and influential relationships which facilitate business and other dealings. These relationships are part of the fabric of Chinese society and foreigners wanting to engage in commerce in China should ensure they have a good understanding of how to build these connections.
While many countries prefer brokering deals in the boardroom, in China, for a deal to be successful, you are required to get to know someone outside the boardroom as well as in the office environment. The individual connection is important and it is essential to build this relationship first, before cementing the business deal. This is one of the cultural and business customs taught in the 16 month IMPM executive program that takes working managers to five countries to experience and learn international business skills.
Guanxi relationships end up becoming a personal network that can be relied on throughout a life time. However, building this network requires commitment and resources. To establish a healthy relationship, you need to nurture it so that your associate can help you in return. Many Chinese business consultants will tell you to bring gifts, such as wine and cigars, to your partners in addition to having a genuine interest in learning their culture and language. As much as these acts seem miniscule, they carry great weight in the Chinese culture and are not a one-time affair. You must consistently develop your business network as these are the people who will directly or indirectly refer you to their acquaintances or connect you to resources.
How to build your business network in China
The question then, is how to build bonds and relationships so you have Guanxi with your Chinese counterparts.
- Build trust with people and do not rely on the good will or influence of the organization to which you might be associated. Just because you come from a large multinational or an influential Not-for-Profit does not give automatic credibility or trust. The relationship must be with the individual. Managers and leaders know people and through these people they build a network that they can trust. The trust is with the network and the relationships not with the organizations.
- Introductions are best made through a person that already has “Guanxi” with the individual that you would like to target. In addition, it is preferable that your first meeting be face to face rather than email or a phone call.
- Take time to build these relationships. For many of us this is difficult as we feel the need to make decisions quickly. To obtain what is required from the business relationship, begin early as it may take a while before you obtain the end result you are seeking. Meeting with your partners is not a one-time act.
- Finally an important part of Guanxi is reliability and dependability. Always be a friend, as good friends can rely on one another when the times are tough or when in need.
Insights from a Visit to China
Recently a group of executives were at Renmin University in Beijing with the International Masters Program for Managers (IMPM) (www.impm.org). These participants learned the primary relationships that form the basis of Guanxi can come from family, friends, school mates, work or the military. Not obvious to the outsider is that the top three relationships are family, school mates and the military. The strength or the power of these relationships comes not only from the favors that may be derived from the relationship but also the consequences of not honoring one of these ties. For instance, if someone breaks the trust of a former classmate from university, not only will they lose approval with the class mate but they may also fall into disfavor with other classmates.
The IMPM participants enjoyed the benefits of these relationships as they visited company sites through contacts of the Chinese hosts.
Business etiquette in China can take many forms. However, it boils down to these three things:
- TRUST – people will always do business with the people they trust
- RESPECT- ensure that you respect the Chinese culture and work to understand it as much as possible
- CONTACT – once you have completed a business deal, don’t forsake your client or cut communication as this will be regarded as bad etiquette.
Join us at IMPM and network internationally. Contact firstname.lastname@example.org