Guanxi

The 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 organisations 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 behaviour inherent to that position. The specific relationships include:

• Ruler to Subject,
• Father to Son,
• Husband to Wife,
• Elder Brother to Younger Brother, and
• Friend to Friend.

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.

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. 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 10p 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

In order to create successful relationships with the Chinese, it is also important to be able to grasp some additional concepts in Chinese culture. Understanding the Chinese concepts of “Face,” “Giving Gifts,” and “Proper Character” can not only provide fresh insight into the minds of the Chinese, but can also greatly increase a Western business person’s ability to create strong relationships and communicate effectively . Remember that although many Chinese have knowledge of Western practices and experience dealing with “unenlightened” Westerners, they are still Chinese at heart. Trying to do things their way not only shows respect but also shows your commitment to a long-term relationship in China.