The Importance of Guanxi
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Allow me to introduce China’s other currency: guanxi. The most common translation for guanxi (关系) is ‘relation’. However, depending on the context it could also mean ‘connection’, ‘reference’, or ‘relevance’ such as in the very common phrase meiguanxi (没关系) – ‘It isn’t relevant’/‘No problem’. As for the guanxi I am writing about here, the closest translation is probably ‘rapport’ and ‘reciprocation’, and it is an extremely valuable yet invisible substance that can be collected, stored, and spent – just like money! Let me explain.

Guanxi is a powerful, all-encompassing foundation in Chinese cultural life. It is essentially about reciprocationI do a favor for you, and I will call upon you to do a favor for me sometime in the future. The greater your guanxi, the greater your influence (or the more people who must return a favor to you). This obligation of reciprocation that is built, maintained, and nurtured through time is the essence of guanxi. Guanxi is essential for people wanting to do business at any level in China.

One part of guanxi is to do something for another person (expecting something in return in the future). Of course, you have to be careful in how you use it; like any kind of currency, guanxi can be considered a resource that will eventually be exhausted, so be careful to not go over the established amount of guanxi one may have with an individual or a party. There is a need to recognize when the act of reciprocating is necessary, but this exchange of favors does not have to be in like kind. Some examples include seeing about getting a visa for somebody or looking into getting their kid into a foreign school. But guanxi also involves inviting or having prospective clients or business partners for dinner or sending a gift to an intermediary who introduced the two parties that decided to work together. The line between guanxi and bribery (which is rife) is blurred.

Any failures in repaying favors are akin to somebody not paying back a financial obligation. If one is unable to repay a specific request, that individual must send a small gift as a way to say sorry and to try and maintain that relationship. An aspect of guanxi involves one party being cautious in establishing a guanxi relationship in which they would be unable to get out of; also, establishing guanxi with an untrustworthy individual would tarnish a person’s reputation. Business leaders would be wise in asking a trusted mutual party to vouch for them.

Another aspect of guanxi will be the ability to judge how to use gifts to bring equilibrium to relationships. If one person is indebted to another, a gift is used to bring a balance to that particular relationship. Of course, not all gifts have motives; often, people are simply saying thanks or expressing gratitude for your presence or friendship.

The concept of guanxi is so deeply ingrained in every aspect of Chinese society that some scholars even claim that this guanxi system affects how China deals with its foreign relations and how Chinese do business overseas. While ‘Western’ countries base their policies on formal documents that are hundreds of pages of legal jargon in length, China tends to base its foreign policies on the unwritten rules of guanxi. Why is it that overseas Chinese are so successful at doing business with mainland China? They do business through their guanxi networks: relatives, friends, friends of friends, neighbors of friends, people from their father’s home-province, etc. They often entrust large sums of money to people whom they have never met before, without the need of formal contracts. As long as they are somehow connected within the same guanxi network, business is on. In conclusion, there are negatives to the guanxi system: corruption, unfair advantages given to select individuals and so on; but there are also positives: speed and practicality in politics and business, skipping over tedious bureaucracy, etc. Whatever the case may be, guanxi permeates Chinese society and in order to be truly successful in China, you had better get yourself started a guanxi savings account.

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