Prospectus

Call out Guanxi and be happy

by Paul Kyle

Having just returned from a trade mission to China, it would be easy to trot out mind-boggling statistics about the Chinese market that quite frankly would put the average Perth & Kinross business off even looking at China as a market. However there is one element of business in China where it is quite clear Scots have an advantage and that is an inherent understanding of the Chinese concept of 'Guanxi' in doing business.

 One of the most crucial business decisions an organization has to make when it intends to make investments in China is getting the right advice. That right advice has a lot to do with "Guanxi". "Guanxi" literally means "relationships" and it is an important concept to understand if one is to function effectively in Chinese society.

The importance of "Guanxi"

Regardless of business experiences in Scotland or other markets, in China it is the right "Guanxi" that makes all the difference in ensuring that business will be successful. By getting the right "Guanxi", the organization minimizes the risks, frustrations, and disappointments when doing business in China. Often it is acquiring the right "Guanxi" with the relevant authorities that will determine the competitive standing of an organization in the long run in China. That is why the correct "Guanxi" is so vital to any successful business strategy in China. Although developing and nurturing the "Guanxi" in China is very demanding on time and resources, the rewards can be high.

How business is conducted

The Chinese culture is distinguished from the Western culture in many ways, including how business is conducted. For example, the Chinese prefer to deal with people they know and trust. On the surface, this does not seem to be much different from doing business in the Western world. But in reality, the heavy reliance on relationship means that western companies have to make themselves known to the Chinese before any business can take place. Furthermore, this relationship is not simply between companies but also between individuals at a personal level. The relationship is not just before sales take place but it is an ongoing process. The company has to maintain the relationship if it wants to do more business with the Chinese.

Many Westerners use the two words "Guanxi" and relationship interchangeably. While on certain occasions, "Guanxi" has certain negative connotations related to bribery and corruption, relationship usually refers to emotional bounds, trust and friendship that originated from previous satisfactory experiences dealing with each other and frequent contacts.

How relationship is established

First of all, it does not have to be based on money. Treating someone with decency while others treat him/her unfairly could result in a good relationship. Second, it starts with and builds on the trustworthiness of the individual or the company. If a company promised certain things and delivered as promised, the company is showing trustworthiness and the Chinese would be more inclined to deal with them again. Third, being dependable and reliable definitely strengthens the relationship. It is like being friends, and friends can count on each other in good and tough times. Fourth, frequent contacts with each other foster understanding and emotional bonds and the Chinese often feel obligated to do business with their friends first.

Having witnessed first hand Perth & Kinross businesses successfully dealing and doing business in China and having been involved in developing relationships with counterparts in China it seems to me that Scots (and the Irish for that matter) are naturals at Guanxi and the Chinese market should be embraced like an old friend.