DISCUSSION Guanxi – what it is and why it (still) matters

by Yolanda Villafuerte _______5th February 2013
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Images from “East meets West” by Yang Liu @Yang Liu Design,www.yangliudesign.com

Guanxi – what it is and why it (still) matters

After ‘Hello’, ‘I am from England’ and ‘Can I get a discount on that’, guanxi is probably one of the first words that someone learns in Chinese. It is (relatively) easy to pronounce (gwan-see) and used fairly regularly in Western media, not to mention in various textbooks on doing business in China. But despite this, it still isn’t a concept that translates well or is easily understood in the West.

Guanxi is usually translated literally as either ‘connections’ or ‘relationships’, however neither one of these meanings really sums up the implications or concept behind guanxi.  Sometimes it is referred to as a ‘relationship network’, a network of ‘special relationships’ or ‘networks of influence’, but all of these can be, frankly, a bit vague.

It is perhaps more useful to think of guanxi as a processFan Yang probably summed it up best:

“Guanxi is the process of social interactions that initially involve two individuals (A and B). A may or may not have special relationships with B. A asks B for assistance (favour) in finding a solution to a problem. B may have the solution at hand, or more often, has to seek further assistance from other connections, i.e. starts another process.” 

To give a practical example, a businessman (A) might have a son (a) who needs a job. He asks a friend and old schoolmate (B) to help. B might not know of any positions within his own company, but he mentions a’s predicament to his father in-law, a retired government official (C). C talks to an old friend (D), who tells (a) to come in on Monday and he will find a position for him. A later sends a hamper to D, as well as taking B and C out to dinner to say thanks. Later on when B needs something, he may very well come to A first to see if he can help him in turn.

Now, none of this may not sound that new or uniquely Chinese. Things like this happen all the time around the world, no?

And yes, despite the prevalent assertion that guanxi plays a special or crucial role in China because Chinese society is somehow uniquely hierarchical and Confucius said so (many years ago), the process of cultivating and using social relationships is not a uniquely Chinese one. It is also a gross mistake to think of guanxi being a stable system that has remained unchanged since the days when Confucian societal rules reigned supreme. In many ways, guanxi is simply a Chinese idiom for a general phenomenon.

There are, however, a few differences.

For one, guanxi is something that is more widely talked about in China, with typical conversations looking something like this: “Why did he get his job?” “Guanxi.” “Why did she get off so lightly?” “Guanxi.”  “How come it took me three years to get your government permit, but it only took you three hours?” “Guanxi.” 

For another, it is a much more concrete system. Guanxi is a reciprocal obligation, so if I were to ask a friend, family member, or colleague to help me out but didn’t return the favour, my social standing with them would be severely damaged if not severed. In fact it would generally be expected that my return to them for the favour would be greater than what they initially did for me, which tends to make cultivating and maintaining guanxi an expensive process. This feeds into the idea of ‘face’ in China, as well as the importance of reputation.

Does it really matter? 

Conventional wisdom does still hold among Chinese and foreigners alike that in China, guanxi is absolutely essential, handed down relatively unchanged through the ages as a defining element of Chinese culture.

And in some ways this is true; it does matter a great deal. Park and Luo showed in a study how guanxi contributes significantly to the growth of companies in terms of market expansion, where it came into play when establishing external relations, legitimacy, and when it came to positioning themselves competitively in the market.

Guanxi is additionally believed – mostly through anecdotal evidence – to offer a lot in terms of obtaining information on government policies, market trends and business opportunities, as well as speeding up or speeding past a lot of bureaucratic red tape.

However what guanxi is not is cheap. That isn’t to say that kickbacks and material benefits are an essential part of the process – ‘good’ guanxi is about establishing a close friendship based on ties, trust, and long term mutual benefits, although there might still be a hamper or two involved. Yet cultivating and maintaining guanxi takes time and resources, and it doesn’t necessarily translate into financial returns in the short term.

Another important thing to remember is that while guanxi is temporarily transferrable between parties – which allow A to access the connections of B – it still remains a kind of personal possession, one that is owned by the individual. Therefore if A were to use his guanxi to secure a business deal for his company, if he was fired or left his job the company might fight it considerably more difficult to renew the contract. Guanxi does not become an organizational asset – unless the company made a considerable and sustained effort to transfer the relationship from A to his replacement.

So while cultivating guanxi might no longer be thought of as the magic ingredient for doing business in China, it still has a role to play. And besides, you never know when you might need a favour or a phone call from the right person. In that sense, it might still be worth sending out a few of those hampers.

 

Sarah Primmer is a research volunteer at Tomorrow’s Company. She is currently studying Chinese and History at SOAS.

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