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As the Godfather always says,
"Do me this favor. I won't forget it.
Ask your friends in the neighborhood about me.
They'll tell you I know how to return a favor."
What is Guanxi?
Culture & History
"Guanxi ( Traditional Chinese 關係 / Simplified Chinese 关系 / guānxi)" is a general Chinese term used to describe relationships that may result in the exchanges of favors or "connections" that are beneficial for the parties involved. Sounds like a simple way to create business right? The truth is this type of relationship can become somewhat time consuming and complex.
The Chinese term "guanxi" can, at times, equal the term "networking." The elements of exchanges based on "guanxi" carry a long tradition in doing business in China and Chinese communities. Good "guanxi" can be the key needed to opening doors otherwise closed. The types of relationship building are almost unlimited but exclusive. Not creating situations where others may "lose face (丟臉 / 丢脸 diūliăn)" is an important balancing act that those taking part must be constantly aware of. So good "guanxi" can be created in many ways and should appear to be offered voluntarily. Good "guanxi" can minimize natural or manmade obstacles in doing business in China. Over time it may take some effort to maintain and nurture the needed amount of "guanxi" to do business at different levels. Remember that good "guanxi" can mean more than just going from the back of the line to the front. Those taking part in the acceptance of "guanxi" are required to return "guanxi" given measured on the amount of previous "guanxi" accepted.
In simple terms "guanxi" appears to carry an element of trust. It's true that a lot of business in China revolves around circles of personal and mutual trust. So for any outsider to do business in China they must take the time to form relationships or "guanxi." This has been a big obstacle for many western businesses trying to enter the Chinese market. Business connections made through "guanxi" must be maintained to ensure proper positioning for future business. I call this "relationship after service."
Now that we have a general idea what "guanxi" is, how can good "guanxi" be created and maintained? Most western educated businessmen think that this kind of relationship is only based on direct cash exchanges. Although this is correct on some levels it isn't the norm today. Often "guanxi" transactions are "hidden" and not made obvious to the casual observer. Although the direct giving of "gifts" is a common form of building "guanxi" it isn't the only way. Inviting or hosting dinners for prospective clients or business partners can create an environment for "guanxi." Also the exchange of favors or "inside information" may amount to good "guanxi." However, not all "guanxi" is good "guanxi." Relationships built on "guanxi" can quickly fade or disappear if part of the "relationship chain" is put into question for any reason. There is a fine line between "guanxi" and bribery. The path to good "guanxi" isn't an easy path to follow. Tipping to one side can put relationships made in this way a case for legal action. As China is creating its own terms for capitalism and legal business transactions the distinction many not become any clearer. So creating "guanxi" is like walking into a thick mist where you constantly have to feel your way through.
How much guānxi do you have?