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The importance of Guanxi to do business in China

The Importance Of Guanxi To Do Business In China

Setting up business in Asia, and particularly in China, can be complex if you are not familiar with the codes of a company. In China, the Guanxi is essential to do business, but what is the Guanxi, how to develop its Guanxi … ? So many questions that we will answer since SNECI and its subsidiary in Shanghai will accompany you in your internationalization strategy.

Definition of Guanxi :

What is Guanxi? Guanxi is the basis of business relations in China. It is a major concept in Chinese society and can be equated with “network”, “relationship” or “circle”. In short, it represents everything related to contacts, but the literal translation would be more like “involved relationships”.

The concept of Guanxi remains difficult to understand for Europeans because it links business and personal relationships, whereas in Europe the separation of private and professional life is more marked.

A person’s Guanxi can be similar to a contact book but only composed of trusted people. Indeed, it is a system that allows you to call upon your network through people who can help you in any situation and especially in business since that is what interests us here today.

The interest of Guanxi in an outsourcing strategy :

The Chinese business world is based on a feeling of trust and belonging, relationships are built slowly, but once the link is established, your potential Chinese partners will be ready to help you with all the means they have. Guanxi also allows you to remind everyone’s hierarchical positions, it is a kind of call to order. It creates trust in the various businesses, and thus generates exclusivity in the markets (for example, one avoids entering a market that is already occupied, out of respect for the one who is already there).

Guanxi also helps to avoid any possible public humiliation: when a problem arises, whatever it may be, it is the Guanxi that is consulted first by Chinese citizens, who prefer to report their problem here rather than make it public and risk being shamed.

The Guanxi can therefore be mobilized to solve problems, especially at the level of decision-making. This conception of decision-making problems is understood in a broad sense and covers resolutions of family, personal or professional problems.

Guanxi is thus a system of exchange of services, a favor at time T for a service in the other direction at time T+1. It is important to note that the system is deliberately non-symmetrical. The goal is therefore to return a service of greater value than the value of the service that an individual has received. This makes it possible to maintain the relationship, which would otherwise be terminated as soon as the debtor has extinguished the debt. It is a strong social norm that will exclude a person from society if he or she does not respect it. This also shows us that a Guanxi can stop at any time, it is not a lifetime commitment, it must be maintained.

For companies, Guanxi can be a very powerful weapon. Indeed, if your Guanxi is composed of investors, it will be much easier for you to grow your business. It is a real economic asset. Chinese investors are real allies for companies and their development on the market. They can be found on social networks, they like to share their opinion, their thoughts … They can be found on the social network Zhihu where they like to share information and their knowledge for example.

How to set up Guanxi : 

Guanxi is set up through an initial bond of trust. To join a Guanxi, you simply need to be sponsored by a third party who trusts you enough to introduce you to the right people. This notion of trust is essential, it must be qualified as absolute and mutual. It goes beyond a relationship between business partners or colleagues. All individuals involved make reciprocal efforts (win-win) in order to maintain a beneficial and stable collaboration. The principle of reciprocity must be remembered because it is central to this development process.

Guanxi can be implemented through participation in external events organized by your company or another company, such as a business lunch. During this event you will have the opportunity to learn about the different rules. These rules must be respected, such as the fact of bringing a gift and paying attention to the way it is given. It is important to respect these rules because they will allow you to have a good impression in the eyes of Chinese citizens.

In the Chinese culture, there are many habits and social norms, it is important to respect them because they are important in the eyes of the population. Adaptability will be a great quality in order to be able to develop your Guanxi with people who are hierarchically superior. One of the many social norms is to toast between partners and collaborators during a dinner for example, the placement of the glass is very codified when you toast with a person hierarchically superior to you. Another relatively well-known norm that you should also be careful of is that if you have to express an idea or an opinion, using your hands or raising your voice is very much frowned upon and could have quite serious consequences.

If your Guanxi is built properly, it can be a real economic asset, it will save you a lot of time and it will be an efficient development lever. This is particularly advantageous for long-term business but also for your professional career.

Word of mouth can be a very good way to develop your Guanxi, and it is a very common way to communicate in China. Besides, a Guanxi with an investor is a huge advantage. Having a potential investor as a trusted person can make it much easier to develop a business.

It is also interesting to create an e-reputation through Chinese social networks such as Baidu, WeChat…

Baidu is the Chinese equivalent of Google, it is therefore necessary to consider carrying out a SEO campaign, this strategy is very suitable in this kind of case. And WeChat with one billion active users will allow you to have visibility throughout the country but also throughout the world (all French brands have an official WeChat account).

SNECI the Guanxi support : 

With 70 years of experience and 10 international subsidiaries, one of which is located in Shanghai, China, SNECI accompanies its customers beyond the European borders to enable manufacturers and suppliers to develop their business.

2 approaches are possible with SNECI through Guanxi and our teams on site.

A support in improving the commercial performance from which our teams carry out market research, M&A services, aftermarket but also business development by allowing you either to penetrate the Chinese market, or to Chinese companies to enter the panel of French companies.

A support in improving industrial performance with 6 services ranging from purchasing, logistics, management of industrial projects, quality diagnosis and auditing through training & coaching without forgetting the sorting and reworking.

You will have understood, the Guanxi is an important notion to take into account in the case of a company doing business in China and even outside China. It is an essential system for the development of a business network. Any person being in the business world in China is in the quasi obligation to be allotted a Guanxi.

So if you also want to develop your business in China, do not hesitate to contact us directly on our website or by email so that our local teams can accompany you.

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