Guan xi in China

How does it work?

 

guanxi

What is guan xi? How does it work?

Chinese like to say that their style of administration is ‘people based’ (renzhi  人治), rather than ‘legal-based’  (fazhi 法治 ).   This does not mean that legal system is absent in the country. In fact, China is one of the earliest civilizations that introduced legal system into the public administration. 

They are simply emphasizing the roles social relationships and connections play in getting things work. In this aspect, guanxi plays a very critical role.

Click here to find out how the phrase 'guanxi' is pronounced.

Click here to read about how guanxi can be managed as a foreigner.

 

guanxi definition

Guanxi literally means relationship in Chinese. 

Using it in the business sense, it refers more to the social connections that would bring you competitive advantage. 

On the surface, it seems nothing unusual.  It is a platitude to talk about the importance of business connection!  Who doesn't know that, “In business, it is not what you know, but who you know that counts.”

But the importance of guanxi in China goes beyond the notion of business connection that the Western world is familiar with. In a way, it is an extreme form of business connection.  Its focus can be quite different from the business networking.

Even in business, it is a personal, non-official network. It is often exclusive and invisible to outsiders.  It can be penetrable, if you take care to cultivate it.

Like it or not, you'll have to establish your own sets of guan xi if you want to be effective in China. It can be as straightforward as a network of relationships among your business partners, such as suppliers and business service providers.

It is intertwining, fluid and changing and requires constant attention to keep it healthy and working. It may require you to go out of your way or bend over backward to serve the interests of other members of the network to keep the guanxi and make it work. 

An asset

Guan xi in a form of social connection is an asset for Chinese businesspersons. 

Be prepared. You'll hear people brag about such connections in order to impress, and indeed a right connection alone can be sufficient for a person to live by handsomely. 

Whether you are marketing products or setting up a factory, so long as you have to rely on others to get things done, guanxi would come into play. A person with the right business connection in China would link you up with the right persons, cutting short the process of getting things done. Paying ‘introduction fee’ to such persons either monetarily or in kind is a common practice when doing business in China.

In general, the highly valued connections include those with the right government officials; key personnel of companies -- especially the well-known and influential ones -- as well as those who are familiar with important markets or supply sources.

 

Difficult to manage

Guanxi is convenient, but does not necessarily work all the time. Investing in a wrong person can do you more harm than good. 

It is fluid and very delicate, and especially elusive when you are unfamiliar with the language and culture.  For every set of connections, there is a unique code of ethics and conduct.   In addition, building and maintaining it can be time and resource consuming. 

The good news is that with China getting more open and transparent, the roles of guanxi are expected to become less important. In the mean time, unfortunately, it is still very entrenched in the culture. Chances are that somehow you'll have to rely on it to get things done.

 

Historical Factor

Historically, family and clan used to be the core connections for an individual. China is big. If you are out of your home town, people from the same clan would try to help one another up.  Clan and family are still important networks for Chinese today, although not the only ones.

 

Click here to read about how guanxi can be managed as a foreigner.

Read more about Chinese mindset.

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