Doing Business in China

Guanxi - Developing Relationships

My wife has asked me to write a couple of blog installments while she is back in the USA and I am still in Shanghai.

The last few weeks I’ve taken the opportunity to do some business travel to meet some suppliers to our operation here in Shanghai. My visits were to areas of China that I have never been so the sights and scenery were a little different than that of Shanghai. Some of the areas I visited looked very much like mountains of North Carolina where our US home is located, so I felt very much at home.

The thing I found most interesting about the trips was the time spent with our suppliers. Some of the interaction was at the manufacturing facilities during my tour and meetings, but the most important interaction was at lunch or dinner. In China, a very important part of doing business is developing a relationship with your customer, client, or supplier. In China this is called “guanxi”. Guanxi literally means "relationships” and is really any type of non-family relationship. In business it is the network of relationships among individuals or companies that cooperate together and support one another. In the USA we generally try to form a partnership between two companies as well that benefits both companies. In China, this partnership is much more complex and often looks almost illegal from a westerner’s point of view.

Guanxi can take on many forms. It is sometimes based on money that is generally given in a red envelope, but in business, most times it is just an understanding and a feeling of trust between two companies or individuals. You want to do business with someone that you can trust completely. Guanxi is widely involved in the Chinese business culture with government interactions. Many times government Party officials or managers in Customs or other offices are given gifts or “red–envelope” money as a way to help cultivate a working relationship. In many cultures, including maybe the USA, these payments or gifts may be seen as a way to skirt the law – a bribe. In China, it is not a bribe but is just a cost of getting things done efficiently. It is completely legal in Chinese culture and not regarded as bribery in any way. Trustworthiness of both the company and individual is an important part of guanxi. Following through on promises is also important. Developing this guanxi can take much time. It is really like building a long term friendship. The Chinese feel obligated to do business with their friends first.

A major way to build this relationship between two companies is through a somewhat formal lunch or dinner. Many times spouses or children are also involved.

The planning of meals and interaction during meals is a very interesting part of the Chinese culture and the building of guanxi between individuals or companies. I had heard and read much about proper etiquette during a Chinese business meal. Much of what I learned was exactly what I encountered during the business meals of my trip.

Next blog installment…the Chinese business lunch/dinner and what I had no choice but to eat.