Graduating with a degree in Sinology and spending over 10 years in China, it comes naturally for me to analyze the differences between Chinese and Western business culture. Anyone who has ever done business in China will quickly stumble upon the concept of guanxi (关系), but few and far between will fully grasp the concept. Some will oversimplify it and connect it with corruption, some will say it is fading and will ignore the importance, thus, failing miserably in achieving their China business goals.
Guanxi can’t be easily translated, but it can be vaguely interpreted as personal connections, relationships or social networks. It implies trust and mutual obligations between parties, and it operates on personal, familial, social, business, and political levels.
The term guanxi has over a 2000-year history in Chinese society and goes hand in hand with Confucianism that holds a significant position in Chinese society since the Han dynasty (BC 206–AD 220). Confucianism is a philosophy, ethical guide and belief system, which laid the foundation for much of Chinese culture. In Confucian societies, human beings are fundamentally relationship-oriented and it is considered that building a strong and orderly hierarchy of relations can help achieve social and economic order in society. Due to the social embeddedness of business relations in China, guanxi has been advocated as a pervasive relationship lubricant that helps to increase the efficiency and effectiveness of daily business operations.
Though in the West most people don’t know the concept of guanxi, most will agree that having a strong social and business network is a valuable asset and can open up many doors. Most estimates suggest 80 percent of jobs are found through personal networks. Going a step further, it is estimated that up to 80 percent of jobs never get posted and are only found through networking. Companies often acquire competitors’ sales reps because of their strong relationships with key customers and their reputation within the industry. Consultants with ties to regulatory agencies can often better navigate or even shape government policy. Washington is pretty much a revolving door of politicians turned lobbyists.
I could dig deeper on comparative studies that have been done on this topic, but not to bore anyone with overcomplex and lengthy scholarly articles on guanxi and social networks, I can only suggest to those with a deeper interest to read more publications by Ronald Burt, who has done fascinating work on how social networks create competitive advantages in careers and organizations. To quickly bring you up to speed with the conclusion - strong professional networks or guanxi in combination with having a good reputation and built trust correlates to business success in China as well as in other Western countries. Guanxi is not just a phenomenon of China, it can be seen across the world, though it might be named differently.
It applies to all industries, however, there are some industries where the correlation is stronger and in some less noticeable, economic development leans towards the former. It is considered that networks, relationships, and professional services skills are core to economic development, investment attraction and facilitation. The most successful economic development organizations (EDOs) develop and operate an intermediaries program as a key pillar of their business attraction strategy. Finding the right contacts and building relationships takes time and requires focus. To help in some of the steps, Wavteq has built a unique online platform providing a complete solution for EDOs to develop and implement an intermediaries strategy. With access to 28 000 professionals located in over 700 cities across 182 countries around the world and growing daily - Wavteq influencers provides access to all the professional contacts EDOs requires to support investment attraction.
Apart from finding the right connections, it is important to nurture your existing connections in order to keep building and strengthening your network. After consulting Western companies of how to do business in China, and later moving to the USA, I quickly learned that many of the tips I gave there are based on a fundamental human value system and can be helpful anywhere.
These are my 5 takeaways I learned in China, but can be helpful outside of China as well:
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