At the moment, there are two contrasting opinions regarding starting a business in China. To put it simply, the first view on this is the public opinion, and the other view belongs to individuals who have been working with Chinese partners for a long time. “Public opinion” is inclined to think that conducting business in China is simple, easy, profitable; the latter argue that it is a challenging, long term process, and even dangerous at times. Probably, the truth is somewhere in between. In any case, everything is different and complex when it comes to China. To establish and sustain productive cooperation with Chinese colleagues, one would have to be patient in the first place. Your partners should recognize and accept you as a personality to begin with; otherwise, you will not have an effective partnership. The core factor in developing partnerships and interactions in China is personal communication. The Chinese need to get to know the person they are going to work with. Do not anticipate instantaneous results as it might take even years. The guanxi principle (关系) plays a fundamental role in Chinese business etiquette and building relationships with partners.
Nature of guanxi.
Many researchers suggest looking for the roots of “guanxi” in Confucianism. It was based on the statement that to achieve social harmony, it is essential to develop coherent interrelation. Confucianism identifies five main types of relations: chief and subordinate, father and son, older brother and younger brother, husband and wife, friend and friend. In practice, this division starts to “work for the guanxi,” provided the following postulates are maintained: direct affiliation to a group, powerful bondage and dependency on it, the presence of family bonds, connections with many people in power. If a Chinese businessman would want to enjoy the “privileges” granted by guanxi, he must always prove his honesty and commitment to these people. The right to belong to groups as such must be earned; in other words, one should deserve it by rigorously adhering to both business obligations and moral principles. Guanxi is a social relations model built on mutually beneficial cooperation and mutual services both personally and at the business level. In European culture, the equivalent of guanxi is “ties” (connections). At the same time, it is crucial to understand that “ties,” as they are traditionally perceived in some countries and “guanxi” for the Chinese, have entirely different meanings.
“Guanxi” and “outsiders” from the West
As noted by Professor James Finckenauer (USA), “guanxi” basically means “reciprocity” (exchange). It means that there is a particular responsibility among certain people: you owe me something, as I did something for you, or someone from my family did something for your family, and therefore you owe me. The aforementioned plays a significant role in business, and European businessmen will have to deal with it while working with people who have “guanxi.”
Vyacheslav Lysenko, the leading specialist in Ukrainian-Chinese business, came across the notion of “guanxi” many years ago. According to him, “guanxi” roughly translates as “connections,” but it is more than just connections in reality. Within Chinese mentality, this is a relationship that deserves some reciprocal action. In other words, it is about you establishing a relationship that deserves a mutual respectful attitude towards you as well. China is interwoven and “built” on this. It is improbable to establish such relationships in a quick manner. It took him almost 5-7 years to create “guanxi” in China. The Chinese are in no hurry to start “guanxi” with the Europeans; they observe for a long time, and if they feel that you sincerely respect their nationality and culture, they watch you even closer for about five years. If you are disrespectful, there is no way you will have “guanxi” with Chinese. But if you have created “guanxi,” then an old friend in China would be better than twenty new friends. “Guanxi” can open almost any opportunity for you, depending on the level you reached in “building” it. Guanxi is when the Chinese will do more than you deserve for the sake of this relationship. If this is translated into business, it comes to the guarantee, trusting one’s finances in the partner’s hands.
Dr. Finckenauer recalls how he and his colleague flew to China from the US to study a certain tendency related to organized crime. Scholars were well aware that no one would talk to them. They ended up finding someone they knew, asked that person to talk to somebody else until they found someone who had a connection with people they wanted to interview. That person asked for a favor to organize an interview with Americans. There was “guanxi”; they felt obligated, and only then was there a talk with American scholars because a Chinese person with guanxi asked for it, and the other side was obliged.
Vyacheslav Lysenko had a different case with the “guanxi.” He and his partner had already built some relationships. When his partner needed Lysenko’s help in accommodating the first 3 million dollars, he had to pledge all the property, everything that was. But after he received financial assistance for the project and demonstrated the transparency of the business, after that, when there was a need for another 10 million, that sum was ready right after one phone call in 15 minutes. That is, how “guanxi” is established on a very long-term basis, but it becomes a powerful engine later for relationships. Accordingly, no one will ever let such a person down.
Guanxi and business.
Most often, “guanxi” decide everything when it comes to fairly large projects. It is impossible and irrelevant to “arrange the fate” of each small order coming from unknown foreign companies personally. But if there is a serious deal and decent capital at stake, it is worth taking a course to establish close professional relations with Eastern partners. This will allow you to count on responsibility and high standards of service on their part.
However, as noted by businessman Vyacheslav Lysenko, there is no way to easily and quickly build these relationships. If you treat the Chinese with disdain, if you make intentions to gain confidence and deceive them later on, the Chinese will unravel you, and five years would be more than enough to do that. When the Chinese are building “guanxi,” they consider every tiny detail. They will judge you by the “small things” such as how you treat the staff, the waiter, what gifts you make, how you respond to messages. They form an idea of you from a thousand little things. And if you are planning something mischievous, you will surely give the game away. If at least one puzzle in the mosaic alleges that you are a dubious person, everything will fall apart, and “guanxi” will not work out.
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Dr. James Finckenauer
Distinguished American organized crime expert, author. Professor Emeritus at Rutgers University, former Director of the National Institute of Justice, Washington DC. Dr. Finckenauer is an expert in human trafficking, juvenile and international criminal justice. He has conducted research in China multiple times and authored several books together with Dr. Ko-Lin Chin.
Vyacheslav Lysenko is a Ukrainian businessman, an expert in Ukrainian-Chinese relations in foreign economic activity. Founder of Ukr-China Communication. Co-founder of Young Business Club. Member of the Supervisory Board of CEO Club Ukraine.