China’s ways of doing business are becoming more Westernized. But non-Chinese executives still must work hard at building trust in relationships with their Chinese business partners.
A global automotive company entered the mainland China market following what it thought were the rules. Executives knew gifts were an important personal gesture and integral to Chinese business etiquette. They also knew that success in Chinese business culture was as much about whom you know as what you know.
To make the right connections, the company sponsored events and hosted lavish dinner parties to cultivate personal ties, including the all-important guanxi (commonly defined as personal connections between people doing business). Several years later, the company faced the fact that its efforts were producing minimal results.
As they tried to discover why, executives learned that despite all their efforts, the company had actually acquired a bad reputation among potential Chinese industry partners. The potential partners had come to view the company as a seeker of short-term transactional opportunities wrapped in expensive entertainment.
The Chinese executives the company had carefully courted socially now viewed it as a source of free entertainment — a perk they came to expect with every interaction. Even worse, the potential Chinese partners had developed the impression that the company had few compelling business propositions to offer since it didn’t seem to be focused on doing business. Although the company knew the people it needed to know, like many other companies eager to gain a foothold in China, it had failed in its efforts to build critical relationships —and as a result, its business initiatives failed too.
The Myths of Guanxi
In our studies of intercultural relationships between Chinese and Western executives, my colleagues and I discovered that a fundamental misconception has arisen about guanxi. Experts line up to sell Western executives courses, websites, books and articles that promise to help them build guanxi. But the advice rarely strays beyond superficial notions of family and friendship and tips about such things as keeping business cards out of one’s back pocket. Although there is an enormous focus on building relationships, there is little understanding of what makes them actually work.
The prevailing thinking about guanxi falls into two traps. First, it doesn’t recognize that the business environment in China is changing.