Guanxi: Build your Guanxi bank balance if you want to succeed in China.

Build your Guanxi.....the Chinese Way

 

Anyone who has experienced China will be able to tell you that China is very different to what we expect in the West. The business traditions are equally different and if you want to succeed in business in China, it is vitally important that you understand some of the common business practices.  In the West we often   have the attitude that negotiating is purely a task orientated endeavour: primarily based upon price and product. How much am I prepared to pay to buy your product, and how much are you prepared to accept in order to sell me your product?  Now obviously these discussions surrounding price and product will always play a part in any negotiation, but in China it is not always the primary concern. There are very good reasons why this is the case in China, and also why we in the west should not be inconsiderate of these reasons…..we should remember that China is a civilization that stretches back thousands of years. 

Symbolism and tradition are found everywhere in China

Academic studies and many airline business books on China have long  acknowledged the importance of Guanxi or ‘Social Capital’. Guanxi is a confusing term to many business people in the West, but it is important to take time to understand how it works and why it works. Guanxi is essentially the level of status or respect that is accorded to a person based upon their level of social capital or personal connection which they hold within a given group of people. It is related to trust and trustworthiness, but it is much more. In the West we tend to not worry so much about this aspect of the business deal because we use legally binding contracts to ensure the other partner is kept to the agreed bargain (and in some cases even this is not sufficient to ensure ethical behaviour). In China, written contracts are technically legally binding, but in practice can be a legal nightmare. I am sure you can think of many published cases of intellectual property theft in China, from coffee shops such as Starbucks, to car manufacturers like General Motors. Just because you have a legal standing, doesn’t mean that your case will be resolved quickly or satisfactorily. Sometimes it is just better to have built up the trust or Guanxi through other means….. In a business setting Guanxi is about  managing your professional network and also maintaining a strong and solid reputation within that network. As your reputation and level of trust increases, the more likely you will be invited to participate in new deals, and the faster deals will be resolved.   

 Guanxi can take years to establish, and is hard-won and treasured in China. Think of Guanxi as a bank account that you hold, and the more money you have, the more money the bank will be prepared to lend you. Once you can build your Guanxi bank balance to a high level, your ability to succeed in business in China will be enhanced.

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About Nathan H. Gray
Nathan H. Gray is Managing Partner of AsiaAustralis. AsiaAustralis is a stategic consulting service partnership established by experienced international management consultants to assist private and public organisations achieve their strategic objectives in trade, investment and government relations throughout the Australasian region with a particular focus on SE Asia. Based in Adelaide, South Australia, AsiaAustralis has a network of associates throughout Australia and Asia that can be called upon to assist and facilitate major projects, business opportunities and government to government trade and investment facilitation. To Contact AsiaAustralis check out the website: www.asiaaustralis.com or send Nathan an email: nathan@asiaaustralis.com

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