Have you found yourself having trouble developing connections in China? Or turning your connections into something tangible? Let’s look into it by reading about the importance of guanxi in China. Communication and understanding of culture can be said to be one of the more important things to consider when it comes to business, especially here in China.

Because of this, the team here at That’s Mandarin would like to help shed some light on some important things to know, and help you succeed in maintaining and creating long-lasting and beneficial relationships.

In order to make this a little easier to understand and absorb, we’ve made a timeline of some important events that ultimately show the importance of how communication and cultural differences play an important role in building a successful business here in China.

The Importance of Networking (Guanxi) in China

Networking is crucial for the success of any business; multinationals in China aren’t exempted from this rule of thumb. And because the Chinese highly value personal connections- sometimes more than business relationships, every entrepreneur looking to set up business here needs to understand the importance of Guanxi or Networking in China.

What is Guanxi?

When two like-minded parties collaborate at a personal level in order to achieve a mutually-beneficial business goal, the ties that connect them can be termed as Guanxi. Unlike the formal business ties that most western-based business partners have with each other, Guanxi is founded on mutual respect. It is a deep and affectionate form of respect that each party expects and is expected to reciprocate on a long-lasting basis. With time, Guanxi gets deeper and touches on familial, political, and even societal levels of business collaboration.

Having good guanxi has key impacts on your entrepreneurial success in China. Here are 5 of those:

1. Helps you shape policy for optimal competitive advantage

When networking in China, your main focus should be on personal relationships, not business ties per se. Therefore, to have a one-step advantage before setting up a business in China, learn some Chinese words and phrases that you could use to let them know that you are really interested in the conversation. This is the first lesson that you will learn upon landing in China. But how do you learn? You mostly learn through networking. Through networking, you understand that approaching potential investors with your mind fixated on gaining some sort of competitive advantage will only scare them off. This is the knowledge that helps you formulate clever business policies that give you the competitive advantage that you want while still keeping your cards to your chest.

Talking of policy formulation, you need to understand that your policies must align with your industry, the nature of your business, and most importantly, geographical location. You will only know these things during networking meetings. For example: If you intend to start operations within a heavily-regulated sector, say, healthcare or banking, you will need a business policy that does not only incorporate like-minded business people but also the authorities. Sensitive sectors, e.g. the security sector, demands strong guanxi with state-owned corporations.

2. Teaches you how to address the nation’s diverse customer needs

Guanxi helps you to meet the diverse needs that the diverse consumer market in China demands. When you network, your Chinese partners help you to tailor your marketing strategies for urban regions such as Beijing, Shanghai, or Shenzhen. These are regions whose natives understand a little bit of the western culture, and probably wouldn’t mind a couple of western campaign strategies.

You will also learn through Guanxi that people living in Jiangsu, Fujian or any other inland region in China may not be open to western interference. Guanxi helps you to partner with the local, small, family-owned business that runs the economy in rural China so that you can easily penetrate into the rural market. While at it, a Chinese recruitment agency will help you to recruit the right locals for different roles in your company, especially in Western and Northern China where you are likely to struggle without a sizeable number of local employees.

3. Deeper trust

When your clients, employees, and partners relate with you on a personal level, the trust they have in you deepens. This trust is by far and large mutually beneficial: People who trust you will be more willing to pursue a meaningful course with you. Chinese business people want you to show a genuine interest in their culture, while at the same time respecting the cultural differences that exist between the west and the east. That is how they will trust you. The good thing is that they will readily reciprocate your kind gesture; they will respect your culture and guide you on how to navigate around the emotive issues of religion and culture.

4. Better rapport with distributors and suppliers

When you practice guanxi on a business level, you are able to create a good rapport with your distributors and suppliers. That is the key to business growth in China. Sometimes all you need to nurture this rapport is a business meal or drink; never underestimate the power of a simple business dinner in China. 

5. Aids in building relationships with authorities

This is straightforward, really: Foreigners in any international market often struggle to generate as strong government and sectoral ties as the local businesses do. This is still the case in China. If you want to have top-level business interactions with authorities, then you will need good guanxi with local firms.

The Importance of Guanxi in China: Timeline

2002

eBay takes the massive leap into the Chinese markets, investing hundreds of millions of dollars into its platform and brand image. Advertisements are being plastered across buses, buildings, subway platforms, and just about any website willing to listen. Four years later, eBay issues a formal announcement stating it will withdraw from China.

2011

E-commerce marketplace Groupon enters China, after having made the strategic decision of establishing a joint venture with Tencent, a Chinese tech conglomerate. The very same year, Groupon closed down 13 locations and fired over 400 full-time employees.

2014

Two conversing businessmen take a brand new BMW for a test drive. They almost immediately crash, completely, and very, unfortunately, destroying the car. Yet, their business relationship seemed only to flourish, and unlike the car, was in better shape than ever.

The Importance of Guanxi in China: Reasons

What do these three scenarios have in common?
A very difficult-to-understand, yet beyond important concept known as ‘Guanxi’’ (关系).

What is Guanxi?

In layman’s terms, Guanxi is personal connections, communication, and mutual trust between people – a foundational concept to Chinese business. Let’s look back at our previous examples to really see the importance of guanxi in China.
• eBay lost in China in large part due to Taobao’s voice messaging software, which allowed for sellers and customers to form a much closer connection;
• Groupon tried to gain a competitive advantage by poaching as many valued employees as possible from other companies in the industry;
• Our two unlucky drivers shared an experience that bettered their Guanxi.

Where to Start with Guanxi?

What our unfortunate drivers realized, and eBay and Groupon didn’t, was the importance of maintaining and building upon both professional and personal relationships – be it through the Chinese language, mutual assistance in a time of need, or through the simple sharing of a meal.
As a result, it is not unusual for initial business meetings to take place in less formal environments, such as restaurants or bars, as it gives a chance for guanxi to grow.

Remember, don’t fail to consider the human side of the business, especially here in China. The connections you make are ones you benefit from long-term. With good guanxi. you’ll have an amazing advantage to benefit from.

Feel free to share this with friends who are planning on doing business in China, or, are already here. Guanxi is one of the most important terms foreigners should be familiar with. It could save a career.

“Guanxi” in China: Use Them To Your Advantage

In Chinese, the word guanxi (关系) has two basic meanings – “relationship” and “connections”.

It’s not an exaggeration to say that Chinese people are dealing with guanxi almost every minute of their daily lives. It includes one’s relationships with parents, siblings, friends, colleagues, and pretty much everyone around.

If you are in China, guanxi may come in handy in terms of job hunting and promotion, which are two inalienable parts of one’s professional career. In this article, let’s take a closer look at guanxi at workplace from two different perspectives: “relationships” and “connections”.

 

Relationships

In China, showing excessive ambition or aggression in any kind of relationship is viewed as indecent behavior, and that’s why subordination is considered something very delicate in Chinese companies. Working in harmony with your boss and colleagues plays a crucial part in your work, and inappropriately handled relationships with your co-workers could have a detrimental effect on your career development.

If you happen to work in a Chinese company, there are a couple of things that you need to remember if you want to handle your relationship with your colleagues properly.

Below, we present you an insider’s view on guanxi; you might not agree with all points, or they might be different in your culture – but it’s always helpful to have a peak at how the Chinese people see it. It could even help you explain your coworkers’ behaviour in many ways.

 

1. Don’t Make Yourself Look Too Ambitious

It’s certainly a good thing if you can deal with different tasks at work, but it is believed that one had better not show off their versatility in front of colleagues. In other words, “standing out” or “getting noticed” at work isn’t the right thing to do. Some Chinese people are very sensitive and are extremely careful with everything that poses a threat to them. Therefore, as long as your Chinese colleagues see you as a competitor, they’ll keep a distance from you and start gossiping about you. Consequently, your relationship with them will get awkward. It’d be rather sensible to wait for your colleagues to recognize you as an asset to the company.

 

2. Mind Your Own Business Before Helping Others

In China, trying to be helpful is highly valued. However, avoid being too “dedicated” to caring about other people at work, because some colleagues may think you are being too nosy. Sometimes they might even take offence, taking it as if you doubt their skillls and abilities. That’s why it’s important to understand when it’s the right time to help your co-workers, and what exactly they need from you.

 

3. Maintain a Good Relationship With Your Boss

If you work at a Chinese company, your relationship with your boss is closely related to your future career development. Sometimes whether you can get a promotion or not purely depends on your boss. So, always remember to show respect to your boss even when you don’t agree with him/her on a certain issue. Whenever there is a problem or a disagreement, it’d be always helpful to communicate it with your boss in a nice and friendly way.

 

Connections

In China, connections play a vital role when it comes to job hunting and promotion. Every year employers in China receive stacks of CVs from millions of fresh graduates, and the total number of graduates surely exceeds the number of vacancies available on the job market. Bearing this in mind, many fresh graduates try to find a “shortcut”, and get hired by people who know their parents or relatives. They’ll still need to attend an interview in this case, but it’s only a matter of “showing up”, which means it’s rather like a chat.

Chinese people are constantly looking for better opportunities for their professional career, and that’s why many Chinese aren’t willing to stay in the same position or the same company for too long. Again, when you’re thinking of changing your job, your connections might surprise you with some unexpected twists. As we all know, socializing and connections are two inseparable parts for people to grow their social network, and many young people in China have started to realize the importance of making connections. That’s probably one of the reasons why different kinds of social business events have been getting more and more popular in China.