One important fact is, as mentioned earlier, that the Chinese prefer to deal with people they already know and trust. This is of course the case also in many other countries, but in China relationship is especially important. Western companies therefore need to make themselves known to the Chinese before any business can take place. In addition the relationship established should not only be between two companies, but should also reach a more personal level as a relationship between two individuals. The relationship should also be seen as an ongoing process instead of just a trick to obtain a certain deal.
A well-maintained relationship can be seen as a guarantee for future business when dealing with the Chinese. 22 When meeting with Chinese people in a business context it is important to have knowledge about etiquettes in greetings, introductions, exchanging business cards, how to use titles, gift giving and so forth. These may seem like very simple things but in order to make a good impression and consequently build up a relationship leading to guanxi, it is important to do these things right. To give an example on differences we can mention the business card etiquette.
Rituals in exchanging business cards are usually not observed very closely among American business people. 23 In China on the contrary it is important to present your business card in the right way and always to do it using both hands. In addition you should always receive a business card with both hands and never put the card into your pocket or wallet immediately since it is considered rude. 24 It is also recommended that foreigners print their business cards in English on one side and Chinese on the other. 25 4. 2. How to Build up Guanxi
Understanding guanxi and its dynamics is essential when learning to know the social as well as the business behavior of Chinese people. Since guanxi is a very essential part of Chinese business culture, failing to develop a proper kind of guanxi will almost inevitably lead to a failure in the business relationship. Again we would like to emphasize that it is possible for foreigners to develop guanxi and obtain the benefits as long as they are patient and observe the rules. 26 One basic advice for persons dealing with the Chinese is to always be frank: Never make promises you cannot keep.
Do not forget that each favor has to be returned and each promise has to be honored27. Since business in China is very much based on using relationships, doing favors to each other and respecting the face of your partner, the American businessperson coming to China needs to adapt to this way of doing business. The Chinese will do business mostly based on trustful relationships instead of with “who ever give the best deal”. Therefore it is essential to get involved in a guanxi network if you want to succeed with your business.
As we have mentioned, developing guanxi requires a lot of time, money, effort and especially knowledge of the local culture. Consequently getting into the Chinese market is meaningless unless it is done with serious involvement and a long time plan. 28 In China relationships are built and sustained by exchanging favors and gifts in order to work toward attaining goals that are beneficial for both partners. In practice, an individual of an organization often visits his associate in another organization bringing him gifts like wine, cigarettes or the like.
“For foreigners, the cultural logic and social practices of gift giving present one of the most difficult lessons in learning how to “do business right” in China”29. So this may seem very pushy to an American businessman, but after learning to know the Chinese culture, it will become easier to understand and take part in this practice that is very essential to successful Chinese commercial activity. 30 When an international company wants to do business in China a good start is to pay close attention to its immediate Chinese network and try to establish good guanxi with them.
If these relationships are taken good care of they can indirectly link the company to new acquaintances and information resources, which will further help to develop other right guanxi for the company. 31 Like this the network will grow bigger all the time and create an important basis for the company’s business. 5. The Necessity of Guanxi We will here develop the discussion of guanxi by presenting some benefits of having guanxi when doing business in China. We will also take a look into the future by giving some examples of how the meaning of guanxi in business might be changing. 5. 1.
The Benefits of Guanxi The concept of guanxi is described in many literature papers as the key factor of success in the business field in China, and “seen as a potential solution for most problems of entering and operating in China”32. Thus, the term of ‘business guanxi’ applies only for the business field. Contrary to helper or family guanxi, it deals with Business-to-Business (B2B) and Business-to Government (B2G) / qianquan jiaoyi 33. Guanxi is mainly a negotiating behaviour that is useful to open “the right doors” and allows penetrating the closed Chinese system of bureaucracy34.
Thus, business guanxi really developed with the accession of the Public Republic of China (PCR) where personal connections have been since that time the only ways to get things done 35. Moreover guanxi can be seen as the Western notion of Customer Relationship Management (CRM), because it implies long term relationships that rely on trust and reciprocity36. In addition, the best and quickest results in a business negotiation arise when there is a strong guanxi combined with a high-skilled manager. Because the manager will have more abilities than other people (language skills, good knowledge on negotiations, etc.
) he will be able to create good personal connections and consequently a good guanxi37. Finally, others aspects have been raised according to different authors, such as: “Respect of the smooth running of routine business operations, in securing information about government policies and in securing administrative approvals” 38. 5. 2. Problems Linked with Guanxi Guanxi is a necessary notion but for a Westerner it includes some “negative” ethical aspects. One of the main problems when talking of guanxi, and especially with B2G, is corruption.
Money ;– Guanxi –> Power –> Corruption Surely, China is not the only country corrupted in the world but it still is one of the most corrupted countries 39. “The only difference between Guanxi and corruption is that with Guanxi you don’t use pure cash”. 40 One other problem is that when dealing with B2G relations you have to put ethical issues off such as concerns about Human Rights (Tibet, death penalty,… ). Moreover, people who hold monopoly power use their position in order to acquire money and other favours.
Thus, the notion of a rent-seeking defines a person who only seeks to fulfil his/her own needs without showing concern for other party 41, and corresponds to the western word opportunist. As already mentioned, the face is one important aspect when dealing with guanxi is the difficulty of decision-making due to feelings for others, defined as the Ren-Qing dilemma42. Here are some moral elements to help expatriates for understanding ethical management in China: 1) Search the backgrounds of local executives 2) the firm is not controlled by only one person 3) regular and detailed auditing systems 4) Know the politics of your partners…
43 5. 3. Future Development Important changes may erode in the future the basis of guanxi and by so its importance in doing business in China44. Here are some of the changes: ; The economic liberalization in China Since more and more areas will be subject to market mechanisms there will be less connections in the B2G area. Moreover, some local companies do not adapt fast enough to changes and guanxi appears to be both outdated and inadequate45. Finally, information technology can provide information that was only done before through guanxi network.
; Changes in the Civil Service The new system will provide “a stricter separation of political and administrative power, and therefore reduces the possibility of discretionary decisions” ; The rule of Law 46 China is developing a Western-style system of commercial law and independent judiciary (the rule of law) mostly under the pressure of Western countries and institutions (e. g. WTO). ; The new Chinese managers A new type of managers adopting a Western style of management (e. g. MBA’s) is “more prone to rely on hard data than on social relationships”. 6.
Conclusion Guanxi has a long history and it is difficult to discuss it as a separate phenomenon; it is a part of Chinese society. So we have tried to point out the main characteristics of it and see how it shapes the Chinese way of doing business. As for a Westerner, it is important to study the culture and the etiquette. The right kind of behavior and a lot of time and patience will lead to you being part of the guanxi networks. On the other hand, the Chinese society is getting more open and so they are learning to understand the Western way of doing business.
But a country cannot overlook 5,000 years of cultural history and so we will conclude that an expatriate going to China has to respect and understand the Chinese values in order not to offend his business partners. Especially he has to find out about Guanxi.
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