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LAST WORD: Understanding the Sanctified Social Concept of Guānxì
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It was a hot September night in Fuzhou, China, 2010. Having just stepped off the plane into the Middle Kingdom for the first time ever, I embarked on my maiden voyage of the city’s bustling nightlife establishments. Within 5 minutes of sitting down to enjoy a staggeringly inexpensive bottle of Harbin beer, I was approached by ‘Dave’, a shifty looking 30-something American who was keen to enlighten me about the ins and outs of my new home.

As I began to express my interest in the local business scene, Dave boldly came out with a statement that I have since heard more times than I can count: “If you want to do business in China, all you have to do is get guānxì”. Of course, being a complete newbie to both the Chinese language and culture, I was baffled and intrigued by this exotic word. Dave went on, without any encouragement, about how “having guānxì is the most important element of becoming rich and successful in China”. “If you haven’t got guānxì” he explained, “then you’ve got no chance of getting anything done or making any money”.

Over time this concept came up in conversation so many times that I felt compelled to invest a considerable amount of time researching and pondering its meaning and practical implications. A basic definition/translation into English would be social connections or a personalised network of influence. Some scholars complicate it further by associating it with terminology like ‘social capital’.

Linguistic nuances aside, it doesn’t take long to draw the conclusion that building good social relationships is an essential part of doing business in China. In fact, having the right connections is a very useful tool for business people anywhere in the world. However, after several years of getting to know Chinese society and business etiquette, I have come to learn that the concept of guānxì is much more than just a Chinese word for cronyism.

When you browse the net for articles related to the business implications of guānxì, you will be met with thousands of journalistic, academic, and amateurish commentaries, which talk about the importance of putting this concept into practice whilst living and working in China. One such example is an article that was published in Forbes magazine last year, aptly entitled Want To Capitalize On China? You Better Have Good Guanxi!. It sets off by making the case that “the Chinese like to do business with people that they already know and trust – good guanxi is needed for this. In order to achieve the right kind of guanxi, a company and/or individual must show strong qualities of dependability, trustworthiness and respect”. Moreover, the author claims that “once in place, you will be in prime position to launch an assault upon the Chinese market”.

Looking at this thesis from a global perspective, not just a Sino-centric one, there are two particularly striking elements to the guānxì narrative. First of all, there is the portrayal of guānxì as being a uniquely Chinese phenomenon and that it is a much more important factor to success here than it is elsewhere in the world. The second aspect, which is where the misleading and overly simplistic interpretations tend to come from, is the notion that having guānxì somewhat automatically leads to success, and therefore not having guānxì inevitably leads to failure.

In order to evaluate the extent to which these propositions hold true in the real world, we first need to know what guānxì really means in a Chinese business context (as opposed to the image conjured up by outside observers with little experience and exposure). One of the best explanations of guānxì and its significance in commercial activities came from Frank Neville, Vice President of Global Communications and Public Affairs at the Thunderbird School of Global Management:

“Most outsiders coming to China misunderstand guānxì and they misuse it because they see it through their own cultural lens. The important point is that China’s relatively weak judiciary and the less formalised nature of Chinese contract law means that the relationships between people are the glue that holds society together. Applying guānxì properly means that you define your role within a group of people and work with them in a way which protects the mutual bond of trust”.

To exemplify his case, Neville tells of his friend who went to China to negotiate a big real estate deal. They went back to the US having signed a contract and made all the legal arrangements needed to finalise the agreement. Nine months later they returned to take control of the property and their Chinese counterparts frankly informed them that because they had not been in touch since signing the contract, they assumed that the company were no longer interested in the deal and consequently had sold the development to someone else.

From this we can see that guānxì doesn’t simply mean ‘you scratch my back, I’ll scratch yours’; it is a complex, long-term social bond which serves to maintain order in the absence of a highly codified and stringent legal framework for the business sector. So whilst it is important to make friends in the right places, the productive results ultimately come from upholding these relationships over time and honouring unwritten obligations of servitude to one’s new friend/business partner. The meet and greet aspect of guānxì building is only the starting point of a much bigger journey.

Many ‘laowai-preneurs’ and business leaders encounter failure in China simply because they assume that by meeting a powerful local figure at a dinner party and exchanging business cards they have expanded their network of influence. Too often it is the case that foreign business people take their social relationships for granted, and when it then comes to favour-asking time they find that their Chinese Mr. Big has lost interest and moved on to another firm.

Developing proper guānxì is certainly not as easy as the Dave’s of this world would lead you to believe. And in this gift-loving society, it definitely isn’t cheap either! Unlike in England, for example, courting your potential corporate partners with a nice meal and few pints at the local pub won’t keep you popular for long in China.

The good news though is that guānxì isn’t just a Chinese phenomenon. Based on what I have seen and heard from a number of business leaders, the methods and dynamics of network building in China also apply very closely to other Asian societies. Even in the Western world, it is never a bad thing to maintain good relationships with people whom you may not have seen for several years; although it has to be said that a nice email or two would probably get you much further than is the case here. In this part of the world soft bribery skills are indeed very valuable.

And in relation to the idea that having guānxì is all you need to succeed, all I can say is that this is one of those very simplistic notions best left to outside commentators and expats who are not actually putting their own money at stake by trying to do business in China. Many people say that having some guānxì and being fairly fluent in Mandarin are the only tools you need to become rich here; which is true of course apart from also having the long list of skills and personality traits that one needs to be successful in any country.

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