Thursday, May 31, 2007

Getting 'Guanxi' Up To Date

In a recent article by Jeremy Gordon of the China Business Blog, Guanxi (connections) has begun to change greatly oer the past decade and will continue to change, rapidly.

Guanxi” (connections), is an especially mystical Chinese word that, for a long time, has been used by suppliers, officials, pundits (not to forget “chundits”), and others to impress, scare or confuse the hapless foreign businessperson in China. It has been getting quite a lot of press recently, so I thought I would put my oar in and comment.

Literally “guanxi” is a Mandarin Chinese term that describes the complex, inter-dependent relationships that exist between two or more parties. “Guan” means “close together,” and “Xi” means “relationship.” In practice, of course it is a bit more complex. Diligence China provides a good introduction:

  • Guanxi. Technically, it means connections. In mainland China where monetary profit was not always feasible, people developed a semi-formal means of supporting allies and building up a “bank” of obligations owed. It is not always subtle or sublime, though Chinese are so familiar with the idea that there is less need to discuss it directly.”

But I also like this one, from James McGregor, author of “One Billion Customers”:

  • Guanxi, the oft-cited Chinese word for relationships or connections, is overrated, temporary, nontransferable, and resides in the hands of the individual who has it. Never, ever put your business in the position where you are dependent on one individual for access to government officials.”
In the 15 years I have been doing business in China, the “Guanxi factor” has changed a great deal, just as China and its overall business environment have done - there are no longer carts of cabbages to be found round the back of the China World Hotel in Beijing, there seem to be more cars than bikes, the airports are all new and shiny, hotel rooms have internet connections, government departments have phones that actually get answered, and government policy, regulation and process are all largely transparent.

Now, while guanxi is generally less important to the average businessperson, it is certainly still an important issue to understand and manage. Relationships are important in business everywhere, but they are relatively more important (and complex) in China’s group-based culture.

To view the entire article at its original location click on the title of this post.

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