Nwtwork, the key for success in China

Regardless of business experiences in one’s home country, newcomers soon realize that what makes the difference in ensuring business success in China is having good “guanxi”.
“Guanxi” litterally means "relationship", but in the Chinese business world it is intended as a system of mutual obligations among people who cooperate together and support one another. This two-way street requires that if someone does you a favor, they will ask you for one back. What your business could get in return from the favors for your partners are often more much more valuable, especially in the long run. Even if this practice may not seem to be much different from doing business in the West, in reality there are some key differences:

• Chinese feel obligated to do business with friends first. They have the tendency of dividing people into insiders and outsiders. A barely satisfactory business solution provided by a member of their network is always preferred to a better solution provided by an outsider.
• Chinese prefer to deal with people they know and trust. Western companies have to make themselves known and trusted by the Chinese before any business can take place, or else find a trusted third party who vouches for them.
• Guanxi works between individuals at a personal level. The relationship is not just before sales take place, but it is an ongoing process. Frequent contact fosters friendship as they nurture guanxi.
• Guanxi it is not based on money, although gift giving is a vital component of the process. Guanxi it is completely legal in the Chinese culture and not regarded as bribery in any way.
• Guanxi is built with favors, and it is a powerful asset, something like a valuable bank account of favors owed and owing, and those with bigger networks tend to do better. It is so important that it can pay off to hire someone to work for you purely for the contacts he has. The person may in fact do little work but can add immense value to your company by the sheer amount of their guanxi.

Although developing the guanxi is very demanding on time and resources, the time and money necessary to establish a strong network is well worth the investment. All the inevitable risks, barriers, and set-ups you’ll encounter in China will be minimized when you have the right “guanxi” network working for you. That is why guanxi is vital to any successful business strategy in China.