Guanxi

Relationship Building

Westerners normally build transactions and, if they are successful, a relationship will ensue. However, the Chinese believe that prospective business partners should build a relationship and, if successful, commercial transactions will follow.

This difference underlies many misunderstandings arising from business negotiations. Virtually all successful transactions in China result from careful cultivation of the Chinese partner by the foreign one, until a relationship of trust evolves.

Guanxi

The objective of developing close relationships is to build what the Chinese call guanxi (pronounced gwan shee), which are essentially social or business connections based on mutual interest and benefit.

In a centralised and bureaucratic state, reliance on personal contacts is often seen as the only way to get things done.  And in a place like China where the legal system is still relatively weak, the need to rely on guanxi remains strong.

In business, guanxi must be regarded as a two-way relationship. We are all familiar with the expression “you scratch my back, and I’ll scratch yours”. But in guanxi, the obligation does not cease with the second scratch, and the other side will have expectations that the relationship will continue. It is not about making fair weather friends. If you expect guanxi to deliver, relationships must be maintained through regular contact.

Both Chinese and foreign companies will often attribute their business success to having good guanxi. But the obligations of guanxi are very real. In the wrong place, at an inappropriate time, with unsuitable people, the obligations can become a trap which is hard to escape.