In spite of the fact that China has passed through a modernization stage over the last three decades, it’s still be difficult to understand for a westener how to do business in China. Understanding and adapting to these cultural differences is primordial. A clear example is, that making business in China will be based on relationships, often called “Guanxi” opposed to the west, where business transactions are based and primarily focused on the economical factors. That doesn’t mean that economics are not important. It means that collaborating closely with a partner in China’ such as the owner of the factory on the details of a win-win business can come only after gaining his trust.

What is Guanxi?

Informal networks, developing relationships, calling for favours, among others. Guanxi is all of it and even more. 

The term guānxi means RELATIONSHIPS or CONNECTIONS it’s composed by two characters:

关系

Guān: to close (v) or barrier (n) and
Xi: to tie (v) or system (n)

Guanxi is ingrained in the Chinese culture. It’s more than just a mere exchange because this are most of the time just one time transactions.

The best way to describe someone’s Guanxi as a complex web of connections and relationships. The links of this web can be extended in an infinite number of directions an it carries along not only the relations but also someone’s influence and obligations towards the other members of the network. The relationships formed can be considered to last as long as some one’s life.

Relationships located in the first circle are nourished by the practice of giving and taking favours. This is a two ways system where “If I scratch your back, you’ll scratch mine,” is the modus operandi. Favours can be called in at any time this can be within a couple of days, weeks or even years.

Two important facts to take in count

Guanxi is reciprocal: It doesn’t simply involve monetary transaction from one person to another for a favor.

At it’s core it’s characterised by activities of trust and reliability between people of success of all parties involved.

Guanxi is about building strong relationships, and strong relationships take time to be built, and time means money when talking about business.