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Don’t get caught on the wrong side of a Guanxi trade.
By andrew | April 4, 2007
Whether you’re new to China or an “old hand”, the Guanxi issue is going to come up during your negotiations. There are only 3 questions you really need to answer when it comes to Guanxi in China.
- 1)What is it?
Strictly speaking, guanxi translates as “connections”. While almost every business community relies on interpersonal networks and connections to some degree, in China we tend to talk about it a lot more. There are all kinds of interesting historic and sociological reasons for this. Feel free to read about them elsewhere. The important thing for you to know is that when someone else uses the phrase ‘guanxi’ to you, he probably means that his connections and network give him preferred access or leverage to valuable business resources. What you need to understand is that, as far as you are concerned, guanxi is a form of accounting – there are credits and debits. Remember that, because it’s going to pop up again in a few minutes.
- 2) Can it help me?
Yes and no. If you help a colleague’s son fill out a college application or stay up all night helping an associate with a difficult business problem, you will find that you have an important store of real, genuine guanxi. The people whom you have helped want to return the favor because they think well of you AND because it is part of a highly institutionalized etiquette system here in China.
BUT if a potential partner, consultant, salesman or employee talks about how great their guanxi is, you have to be concerned. In China, someone saying they have great guanxi is like saying they have a big bank account or a hot wife. Just because they’ve got it doesn’t necessarily mean that you’ll benefit from it. Make sure it is not just a smokescreen…or worse.
- 3) Will it help me?
Maybe. Sometimes. Probably not.
Here’s the problem – You are a rich, clueless westerner with deep pockets and no business savvy. Sorry – that’s how you’re seen over here. You meet a consultant or potential partner who says he can help you solve a problem. He’s going to introduce you to the Important Guy, and all your problems will be solved, right? Hold on – remember the balance-sheet nature of guanxi we talked about earlier? You are assuming that your new expensive friend is going to incur a guanxi debt (or draw down a guanxi balance) to help you out. But what if YOU (and your budget) are the guanxi pay-back? What if you are the lamb being led to the slaughter to enhance your new friend’s guanxi balance vis-à-vis his powerful connection?
Yes, it’s a horrible, horrible thought – but it happens pretty regularly. Any time someone mentions how he is going to use his guanxi or connections to help you, take that as the START of the conversation – not the conclusion.
Topics: Business Entry, Due diligence |
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