Monthly Archive March 2019

Guan Xi, the key to business success in China

While the Chinese business market is constantly modernizing, adapting, and growing; there is still a concept of immense cultural importance that has governed Chinese business practices for many years. The notion of 关系 (Guan Xi) is essential for any company to understand if they intend on doing business in China.

At its core, guan xi is about building relationships. Trust is crucial to business success in China, and it is something that does not come quickly. While it may seem counterintuitive in the current fast-paced business environment of the United States, a great deal of relationship building in China exists outside of conference calls and boardroom meetings. In China, face to face interaction helps build a kind of trust that simply cannot be acquired through only communicating through a phone speaker halfway across the world. Because of the integral part that guanxi plays in Chinese business; it is essential for an American company hoping to do business in China to make sure that they have a strong understanding of Chinese culture in order to build a strong relationship with Chinese businesses.

The impact of guan xi cannot be understated. Building guanxi with a Chinese company is tantamount to forming a sort of friendship with them. Like any friendship, Chinese companies that have guanxi with American companies will be more inclined to have more confidence in business interactions as well as be more willing to pursue further business with that company. Once guanxi has been established, a Chinese company will be more willing to pursue further business ties with a company who has earned their trust and respect.

A good example of guanxi in action is when one of Incorpchina’s clients needed urgent help to apply for general taxpayer status. Robert Fisch, Incorpchina’s CEO, went to the tax bureau and found the bureau chief. Rather than immediately getting down to brass tacks, Robert drank tea with the bureau chief all morning. After getting to know each other’s backgrounds, guanxi had been established. The bureau chief was willing to connect Robert with the department heads and continue building connections with Incorpchina. This demonstrates how once guanxi is established, it will likely lead to deeper relationships.

Incorpchina’s client urgently needed taxpayer status. Normally, one would have to present themselves in person at the tax bureau in order to complete their application. Even after appearing in person, the client might still have to wait for upwards of a month for their application to be approved. Due to the relationship that had been established between Robert and the officials at the tax bureau, the office allowed the contract to be processed in two days, allowing the client to win business in China.

Ultimately, a strong understanding of guanxi can not only expedite business in China but also serve as a tool to expand and strengthen a company’s enterprise within the Chinese market. In China, trust and relationship building are truly the keys to prosperity; once one has established a close relationship in China, success will surely follow.