Developing business relationships in China

Relationships are everything in China, and when conducting business in China, building relationships is one of the most important steps. While you are building and nurturing your business relationships, you may be asked to share stories and information of a surprisingly personal nature with your contacts. Don’t be concerned when a Chinese person you are meeting for the first time asks, for example, "how much money do you make?", "what is your partner’s Eastern astrology symbol?" or "what are your religious beliefs" – it is all about building a relationship, an essential part of cultural etiquette and doing business in China.

The Chinese call it guanxi (关系). This refers to having personal trust and a strong relationship with someone, and can involve moral obligations and exchanging favours. Sometimes potentially  perceived in Western business as bordering on unethical behaviour associated with corruption (i.e. awarding projects to a friend’s company rather than the most qualified firm), it is a core part of doing business in China.

John Russell, Director of North Head consultancy, says guanxi is the key driver in Chinese business culture and relationships.

“The Chinese business model tends to be less contractual and more based on trust and the guanxi so there can be a sense of frustration. It’s slower to build relationships, but having said that, once trust has been established the Chinese partners and entities normally want to move very quickly. An understanding of those relationships is necessary for success, but increasingly with economic reform and changes in China guanxi is no longer sufficient for success.”

It is important to build business relationships with partners that are open to fresh thinking and new ideas. Whether they are agents, distributors, or other partners, they must have enough experience in the local industry and familiarity with differences in local consumer and industry segments to see how to carry through with new ideas. Above all, your business partner must possess resources and relationships that complement yours. But alliances come with their risks. Trust and regular communication through the relationship cycle are essential and the need for practising due diligence cannot be emphasised enough.

A common reason for failure among Australian businesses in China comes from their lack of understanding of their Chinese business partners. Some Australian businesses have failed to be proactive in developing and maintaining a relationship with a Chinese business partner. Time and money must be invested to help you understand your business partner’s expectations and ways of doing business. Communication and setting clear expectations are essential.

Conducting due diligence is an important early step in establishing relationships in China. It is through this process that you will be able to observe your potential partner in their natural environment before formalising your relationship. They will likewise be conducting due diligence on your organisation, so it is important to present your organisation well, and have strong, clear communication.

Case Study: ManageChina

Outside of business partners, it is also critical to maintain good relationships with government and industry contacts, who can provide invaluable assistance.

Tim Lyons, founder and director of ManageChina, a professional services company, says cultivating business relationships is they key to hitting the ground running in China.

“You need networks wherever you go but in China you almost need an instant network when you land. The chambers of commerce in China are more important than anywhere I’ve worked before. The first thing you should be doing is reaching out to the local chamber of commerce and asking how to get involved and building your network out from there. It’s a starting point, a kick-off. It’s mission critical.”

Want to learn more? Explore our other China information categories or download the China Country Starter Pack.