Andrew Hupert posted an interesting look at foreigners and guanxi recently. The concepts of face and guanxi are closely related, and for any foreigner planning to do business in China it is certainly worth taking time to try to understand the two.
Andrew starts his series on guanxi with a definition. It is a wonderfully clear explanation of a very complex concept:
‘Guanxi’ literally translates as ‘connection’ though it is often used to mean ‘relationship’ and ‘network’. When Mainlanders use the phrase among themselves, they are referring to a fluid network of cordial business obligations and debts – sort of an institutionalized version of ‘you scratch my back, I’ll scratch yours’. A person with a wide range of well-placed relationships, all of whom acknowledge their indebtedness and willingness to reciprocate, is clearly in a very advantageous position. Conversely, a person who lacks connections and is not in a position to do favors for new counter-parties is in a relatively weak situation. The worst position of all is one who owes valuable favors to a wide range of highly placed connections.
Guanxi is not just having relationships and connections – it is about those “obligations and debts”. Knowing people is of no value, guanxi wise, unless those people have a reason to (and are likely to) help you out.
When Chinese associates talk to Westerners about guanxi, it takes on a slightly different meaning. Here the emphasis is on the ability to influence members of his network. . .For a long time, guanxi was synonymous with “local knowledge” – but carried a strong implication of corruption and under-the-table inducements.
This calls to mind the image of a shady guy making things happen that shouldn’t, because of his mysterious guanxi power. Guanxi has been built up in the minds of some foreigners to something almost mystic and unattainable to the uninitiated. This isn’t accurate. Guanxi is simply a network of give-and-take – doing something to help another person, without any obvious short term gain for yourself, understanding that they are now in your debt, and will return the favor sometime in the future.
When the China economy was first opening to the world (up until the mid 2000’s), commercial laws were still haphazard, contradictory and opaque. In such a chaotic environment, a local ‘fixer’ was often required to prod bureaucrats and state managers to make a decision. . . China’s central government, however, was busily constructing what it hoped would be a strong legal system and a (relatively) transparent regulatory framework. . .
That is why Westerners in China often find themselves caught between two opposing views on the guanxi issue. On the one hand, locals still maintain it is the only way to get things done in Mainland China – and that without it foreigners will never overcome their status as rich but clueless outsiders. However, a growing community of experienced, knowledgeable international experts maintains that guanxi is an ineffective, expensive and ultimately counter-productive throwback to the ‘bad old days’ of a lawless, chaotic China where personal influence trumped laws and regulations.
I think Andrew has it right here – China has changed. While calling in favors may have been essential for getting through the endless bureaucracy in earlier years, bureaucratic processes are becoming more formalized and it is harder to skip steps with simply the say so of a well-placed friend.
Guanxi is extremely useful and powerful – as an information network. A broad, active web of plugged-in connections can alert you to people who are willing and able to help – but who have no idea how to find you and no other way of being found by you. . .As a skeleton key that will magically unlock doors, it is problematic.
Guanxi is not the solution to business problems. Knowing a person in the visa department doesn’t negate you from the responsibility to submit your visa application correctly in a timely manner. You must follow the law and complete the required steps, no matter who you know. That said, knowing a well-placed person may help you to find information you need, or get helpful advice on a situation.
In the manufacturing industry, doing your supplier a favor now will generally result in them doing you a favor later. It’s not about skipping steps but rather helping each other to better solutions.
Guanxi networks are great as information and networking resources. However, if you plan on using connections to open doors – or knock down walls – then you are going to encounter some major difficulties down the line. When you use guanxi as a shortcut in China commerce, the destination is usually business failure.
All in all, a useful article. Looking forward to the rest of the series…