Understanding the concept of ‘guanxi’

What is guanxi?

Relationships are everything in China. While you are building and nurturing your business relationships, you may be asked to share stories and information of a surprisingly personal nature. 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 doing business in China. 

The Chinese call this guanxi (关系). Guanxi refers to having personal trust and a strong relationship with someone, and can involve moral obligations and exchanging favours. Sometimes incorrectly 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.

“We open our Suzhou doors whenever an Australian official visits, which helps demonstrate to Chinese government officials that we are well connected and respected at home. The guanxi we display from Australia is often as important as our local guanxi.” – Peter Michell, Executive Director, Michell Wool

Guanxi is often translated as “connections”, “relationships” or “networks”. However, none of these terms do justice to the fundamental and complex concept of guanxi and its central role in Chinese culture. Guanxi can also be used to describe a network of contacts, which an individual can call upon when something needs to be done, and through which they can exert influence on behalf of another. These networks can have a direct impact on conducting business in China, including market expansion and sales growth. Maintaining open 'bureaucratic relationships' can also help businesses set up with minimum delays. But it can also bring challenges. Australian businesses might understandably struggle to integrate guanxi into their business practices. The key is to remain diligent and be aware that the reciprocal nature of guanxi also dictates an informal obligation to 'return the favour'.

How to build guanxi

Building guanxi involves a long-term approach. It can be done in several ways:

General knowledge of China - Relationships can be aided and built by some general knowledge of China and its culture. This can assist to establish an immediate connection to a new Chinese contact.

Formal introduction - Because Chinese people prefer to do business with people they have a personal connection with, it can help if you are introduced to a prospective business associate through an intermediary. The higher the social status that your connection has, the more successful you are likely to be at being introduced to the right people and key decision-makers.

Conscious effort - Relationships in China are more trust-oriented and personal than relationships elsewhere, therefore a conscious and continued effort is required to develop and maintain them. It will require frequent visits, almost daily communication (preferably CEO/company director to CEO) and plenty of socialising.

Gifts - Giving gifts is an important aspect of doing business and building relationships in China. Australians should provide at least some overly ‘Australian’ gifts, such as toy koalas. Gifts that have your company emblem will also be well received.

Dining and entertainment - Once you have established relationships in China, you are likely to be invited to dinners and other forms of entertainment including golf, nightclubbing or karaoke. If you are invited for dinner at a business contact’s house (which is generally a reserved honour) – arrive on time, remove shoes before entering and take a gift. Dining is commonly used to gently probe positions without any formal commitment. 

“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,” John Russell, Director, North Head

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