Make sure that you understand the concept of Guanxi. If you need help with making business connections in China, read on.
Hopefully, by now you will have done business with Chinese, or at a minimum, people from Asia. You will likely have noticed that they form very close friend groups and relations with their families.
In short, they take care of each other.
What exactly is guanxi? It is often referred to as networking or building relations with people. It is far more complicated than simple networking.
Networking in places like the United Kingdom is going to an event, having a conversation, and passing them your business card. The hopes of an attorney at a networking event might be for referrals.
If you are looking for business opportunities, you can see this: ClearWay Law China
Building a professional network in China
Guanxi is building super close relationships with people. These people might take care of your house, drive your children, or help you get out of trouble.
Let’s say you enter into a “guanxi relationship” with someone that works at a university. You might want to get help from this person, let’s call them Mr, Lu, to help your child get into the university.
Mr. Lu connects you to the right people and uses his influence. Your child gets into a good school. When Mr. Lu goes on vacation for a few weeks and asks you to take care of his dog, you better do it.
That’s Guanxi. It’s like exchanging favours. Some of the favours might be small, and some might be big. Chinese business relationships are based on trust.
Some people in western countries think Guanxi is the same as corruption. It’s not the same thing. Think of it as favours. Corruption is something that is illegal.
Do not engage in corruption, or you will need to hire one of our criminal lawyers.
Small business owners and guanxi
The Chinese philosopher Confucius is said to be the one that brought the Guanxi culture to China. Confucius taught that everyone should build many different types of relationships.
This meant business partners, families, friends, and community relationships.
There was a period of time in China when there was no legal system. There were no lawyers or judges. Therefore, Chinese people relied on Guanxi (relationships) to resolve their problems.
People did not want to do bad things, or their reputations would be destroyed. To this day, a lot of family friends try to resolve their friend’s divorces by mediating.
We have also seen friends and family get involved in resolving lawsuits. Sometimes it works well, other times we wish the friend would step aside and let our lawyers handle the problem.
These days, there is a strong legal system in China. People and companies in China can file lawsuits and divorces. However, people still seek protection and help from their family, friends, and connections.
Guanxi provided stability to the Chinese society before there was a legal system.
Personal relationships and international business
People in China find it easier to deal with people they already know. This cannot be unstated. We have seen Chinese people dealing with lawsuits hire an immigration lawyer that they know to represent them.
Even though the immigration lawyer knows very little about lawsuits, the person would rather hire a lawyer than they know.
If you want to do business in China, you are going to have to build actual relationships with people. Very close relationships. Chinese people see relationships as having a mutual obligation.
It’s not a nice thing to do favours, you must do favours for family and friends.
Business meetings often start with small talk. You might want to share personal information about your team. Your ability to build relationships will people will determine your success.
Food is also very important, along with alcohol. Chinese people talk a lot about where to eat and drink. When you eat a meal in China, you often eat at a rotating table. Many people from each company might join.
Someone will often provide a toast, and this toast or “cheers” will likely happen multiple times through lunch or dinner. You might want to take small sips of your wine so that you don’t get drunk.
There is also alcohol that’s popular in China called “Baijiu.” Chinese people sometimes call it white wine, but it’s not. It’s very strong and a very high percentage of alcohol.
Business connections in China and business practices
In the west, someone might use their relationships to pick a real estate agent. However, in China, people use relationships for everything. This includes where to go grocery shopping.
Many westerns really struggle with building connections in China for this reason.
When you are building connections in China, you must focus on the relationship, not on the business terms. In the United States, it’s all about what the terms of the deal are.
In China, you must build a strong relationship with the person first. This often happens before you even discuss the deal at all. Once there is a mutual relationship, then normally the person trusts you, and cares little of the terms.
Starting a company:
Challenges With Doing Business In China
The biggest challenge with companies from places like Canada, the United States, and Australia that come to China is being clear on why they want to expand into the country.
Many people get too excited about the population. There is a big difference between the population and the market.
You need to slow down and do things right. Hire an accountant and lawyer in China. We can help you connect with one. China is a long-term project. You are going to be there for a long time.
It’s not something that you do for a bit and sees what happens.
It’s also hard to get information on the internet in China. That’s why it’s lucky that you found our website. You should bookmark our website as we constantly write business blogs.
In China, you cannot rush into the terms of a deal and negotiation. You need to build a relationship with the person. That is one reason why hiring a Chinese lawyer (who can speak English) is helpful.
The lawyer will not only be able to help you with the legal side of things but can help with the cultural aspects.
The person you are meeting with in China might ask you personal questions. You might wonder why they are asking you if you are married or not. Are they hitting on you? Probably not. They also might ask:
- How old are you?
- Do you have children? How many?
They are just trying to build a long-term relationship.
Business connections in China
In China, things can be very complicated. There is always something going on behind the scenes. If you connect with a CEO, there is likely someone influencing this person.
You need to find out about the person you are speaking to. Learn about this person and how they got into a power position. Someone’s wife or business partner might be calling the shots.
You need to ask a lot of questions. Sometimes it’s someone from a government organization that is truly running things. That does not have to be a bad thing. However, you need to know the facts.
Here is a list of terms for you to do further research:
- social networks
- Chinese culture
- Chinese society
- international business
- government officials
- business in china
- Chinese person
- guanxi networks
- business practices
- personal relationships
- guanxi practice
- personal connection
- guanxi in china
- Chinese people
- Chinese business
Business connections in China During Business Dinner
People show respect and “family” by having lots of food and drinks and the table. There might be more than ten dishes. When you “cheers” someone, you try to hit the glass slightly lower than their glass.
You will also use your right hand to make the toast, and support your glass with your left hand. It might seem silly, but knowing these things will make the Chinese person impressed.
They will know that you are experienced with Chinese culture and customs. Business is all about trust, and they will likely trust you more.
You will need to build close relationships with government officials in China. You should consider them your friends. Gift-giving is an important part of building close relationships.
However, make sure the value of the gift is appropriate. Normally, a bottle of wine is appropriate. Make sure you build relationships with the right people.
You don’t want to get limited to one group of people if they don’t help people. Don’t assume that one or two people will help you just because you brought them wine.
Gift giving is not corruption. Do not confuse the two things. Speak to a lawyer to learn about criminal laws in China.
You also still need to make sure that you get a business lawyer in China to make sure that you have proper contracts in place.
Business Opportunities In China
If you can do something with the internet industry in China, you will likely do very well. You can also look for opportunities that tie into China’s plan to build the “belt and road.” There is a road plan and a shipping plan.
When making business connections in China, make sure you talk about the government’s plans and how you can help. The goal of the belt and road plan is to make it easier for people to trade with China.
For example, there are many businesses in Pakistan that are now doing business with China. China has built ports and roads in Pakistan. China has also offered a lot of loans to companies and countries.
In Sri Lanka, China lent the government and businesses 1.5 billion dollars to build a new shipping port. When Sri Lanka defaulted on the loan, China took over the port.
When there is a lot of money moving around, there are opportunities for business.
A lot of Chinese people love health products that come from other countries. They believe that people in western countries know more about health than China.
Or in the alternative, they believe that products are of higher quality outside of the country. A lot of Chinese are very concerned about their baby’s health.
People go to places like Canada or Hong Kong to buy a lot of products. They will go to the place with empty suitcases and fill them up.
Japan and Korea do well in the Chinese beauty industries. A lot of the products are skin whiteners.
Author: Alistair Vigier is the CEO of Clearway and can be reached on Wechat at: alistairvigier