The Differences between the Chinese Guanxi (Connections) and Australian’s Essay

Introduction

Guanxi is Chinese word that means relationships, any kind of relationships. In the business culture, it simply refers to the network relationships that exist among business partners that cooperate and support each other. Guanxi networks are borne of the Chinese mentality that could be understood as “you scratch my back, I’ll scratch yours.” ¹ In this spirit, parties are expected to exchange favors regularly and voluntarily.

In doing business successfully in China, acquiring the right Guanxi is very important in that the risks, frustrations and disappointments that easily discourage foreigners are minimized. Acquiring a Guanxi with the relevant authorities in regard to ones business will put your business into a long time competitive advantage².

Moreover, for any business enterprise in China a series of risks, barriers, and setups it experiences can be discouraging or render it unable to survive in the market but with the correct Guanxi working for your business, these barriers are eliminated ³.

This fact has been refuted by⁴ who says that benefits of Guanxi in business performance have been exaggerated and cannot be proven since there is not enough data due to the secrecy that shrouds the practice.

Establishing and nurturing a guanxi is a taxing investment in terms of resources and time but in the long run, these investments pay from the favors a person receives from partners especially when they are needed.

A common phenomenon in domestic businesses, in the country, is where a strong network of suppliers, retailers, banks and local government official are working together. In this circle, a common culture is where members visit each other’s residence on social visits and brings gifts to the hosts in terms of wine, cigarettes etc. In the western culture, this may be viewed as intrusion, but in China, this is another arena for furthering business interests as ⁵ observes.

Australian networking takes the western route. This means creating an opportunity to meet and build rapport with people who can help in career development if one is looking for a job, chances of meeting new people and exchanging ideas if one is interested in social networking and chances of connecting businesses for business owners and entrepreneurs ⁶. This is done through networking events, groups or online.

Networking organizations such as Networking World in Australia are business organizations that offer networking services for businesses to join networking groups or events. Business networking is built over time through sharing information and building trust though this is done in a more formal way than in Guanxi.

Businesses networking is done as a long term strategy for people mainly want to judge others professionalism, expertise and confidence. The major focus of networking is gaining contacts, leads and referrals without any personal gifts expected⁷.

How business is conducted in Guanxi

The way business is conducted in china is different in many ways from how the western world conducts theirs⁸. First Chinese businesses prefer to the transaction with people they know and trust relying on relationships, as opposed to who offers the best deal. For an organization that wishes to do business with the Chinese, it has to establish a relationship with the necessary parties who will get to know them first before any business deal is sealed.

These relationships do not simply mean companies getting to know each other but also the individuals involved at a personal level through visits, participating in activities together such as sports and informal meetings among others. These are not one off affair that is done before deals are signed, but an ongoing proces⁹. This means this relationship has to be maintained if more business relations are expected.

How to establish a relationship in Guanxi

Guanxi is established first by treating someone with decency and then showing trustworthiness whether on individual or company level¹⁰. If a Chinese establishes you can be trusted, he/she is likely to do more business with you. In order to strengthen this relationship, dependability and reliability are very crucial where you can be counted on in good and hard times.

Finally, making regular contacts with each other cultivates understanding and emotional bonding and at this level, you are already friends and the Chinese will feel compelled to do business with you first. In another aspect of Guanxi, is the relationships with high rank officials which is still of paramount importance in conducting successful business in China though this culture of political and administrative interference is reducing¹¹.

Companies that do business with government subsidiaries still find this important but for those that do not need help from the government it is of less importance.

Guanxi at another form function as information resources network and for companies that have a wide relationship web, they are able to achieve much better results than those that have little or no relationship with Chinese¹².

Differences of Australian’s networking with guanxi

Australian networking in business takes the form of marketing relationships or business networks that those involved have nothing to do with each other at a personal level. On the other hand, Guanxi in China involves personal relationships where business is all about individuals involved and interact at a personal level even before they conduct any form of business¹³.

In Australian, business networks involves companies and goods in the industry that are being traded with, and the relationships they create at the business level, as opposed to a single employee being the center of the relationship. In China, however, Guanxi is seen as property of an individual working at a personal level; therefore, the company is utilizing the Guanxi assets of its employees. This means that when the person leaves the company, this asset of the networks he/she had created is lost to the organization¹⁴.

In Australia business networks or relationships are between parties who are exchanging products or ideas in their transactions and money is involved. In the Guanxi, the persons involved often do not have goods or services they are exchanging and, therefore, are neither buyers or sellers or even business partners.

These are often exchanging connections and other favors as it may involve a businessman or an employee of a company with a government official or a person with a connection to a government official. Example as described by¹⁵ is of an executive of an overseas company who has a friend in close to a key government official, and is constantly fed information on an upcoming project and the executive gives appropriate presentation based on this information and gets the tender.

In the western business networks, customers and the companies or business partners are all part of the network which does not extend beyond business while, in guanxi customers, business partners or even the organization may not be part of it since it involves private contacts that relate at a personal, informal and clandestine exchanges.

In the above example, the executive of the overseas company and his informant friend in the government have a personal relationship and exchange information secretary and informally without the involvement of the organizations they work for¹⁶.

In Australia, the form of information exchanged between the executive and the Chinese government officials, obviously with a reward, is unethical and constitutes to bribery. Law is broken and this can lead to serious actions taken against the participants, but in China, this is perfectly alright, it is an example of Guanxi at work¹⁷.

Conclusion

Chinese networking (Guanxi) and Australian networking are clearly very different from each other. This is in terms of the level of involvement where in Australia businesses relate at the organization level while in china personal relationships are involved. Relationships are also viewed as a personal property in Guanxi while this is not the case in Australia.

In Guanxi, also personal gifts exchange hands between parties while this is not the case in Australian networks and finally, Guanxi will be viewed as bribery and law breaking in Australia while, in China, this is perfectly legal.

Bibliography

Coopes, Amy. “Australia is social networking capital of the world.” The Telegraph, 2010. Fan, Ying. “Guanxi’s Conseguences: personal gains at social cost.” Journal of Business Ethics, 2002: 371-380.

Gao, Hongmei. “Comparing Chinese guanxi with American networking for foreign-born Chinese job seekers in the U.S.” Business Library, 2007. Web.

Hinner, Michael. Chinese and Western business cultures: A comparison and contrast. Australia: Peter lang Publishing, Inc, 2005.

Lo, Vincent. “Chinese Business Culture: Guanxi, An Important Chinese Business Element.” Los Angeles Chinese Learning Center. Web.

Mungenast, Hannes. Chinese Business Culture. Germany: GRIN Verlag, 2007.

Reuvid, Jonathan. Doing Business with China. United States of America: GMB Publishing, 2005.

Sun, Ted. Inside the Chinese business mind: a tactical guide for managers. United States of America: ABC-CLIO, 2010.

Vanhonacker, Wilfried. “Guanxi Networks in China: how to be the spider not the fly.” The China Business Review, 2004: 48-60.

Wray, Richard, and Heather Stewart. “Western business struggles to break Chinese barriers.” The Guardian, March 28, 2010: 8.

Footnotes

1. Lo, Vincent. “Chinese Business Culture: Guanxi, An Important Chinese Business Element.” Los Angeles Chinese Learning Center.
2. Sun, Ted. Inside the Chinese business mind: a tactical guide for managers. United States of America: ABC-CLIO, 2010.
3. Gao, Hongmei. “Comparing Chinese guanxi with American networking for foreign-born Chinese job seekers in the U.S.” Busioness Library, 2007.
4. Vanhonacker, Wilfried. “Guanxi Networks in China: how to be the spider not the fly.” The China Business Review, 2004: 48-60.
5. Fan, Ying. “Guanxi’s Conseguences: personal gains at social cost.” Journal of Businesss Ethics, 2002: 371-380.
6. Coopes, Amy. “Australia is social networking capital of the world.” The Telegraph, 2010.
7. Hinner, Michael. Chinese and Western business cultures: A comparison and contrast. Australia: Peter lang Publishing, Inc, 2005.
8. Gao, Hongmei. “Comparing Chinese guanxi with American networking for foreign-born Chinese job seekers in the U.S.” Busioness Library, 2007.
9. Hinner, Michael. Chinese and Western business cultures: A comparison and contrast. Australia: Peter lang Publishing, Inc, 2005.
10. Wray, Richard, and Heather Stewart. “Western business struggles to break Chinese barriers.” The Guardian, March 28, 2010: 8.
11. Hinner, Michael. Chinese and Western business cultures: A comparison and contrast. Australia: Peter lang Publishing, Inc, 2005.
12. Mungenast, Hannes. Chinese Business Culture. Germany: GRIN Verlag, 2007.
13. Reuvid, Jonathan. Doing Business with China. United States of America: GMB Publishing, 2005.
14. Sun, Ted. Inside the Chinese business mind: a tactical guide for managers. United States of America: ABC-CLIO, 2010.
15. Vanhonacker, Wilfried. “Guanxi Networks in China: how to be the spider not the fly.” The China Business Review, 2004: 48-60.
16. Gao, Hongmei. “Comparing Chinese guanxi with American networking for foreign- born Chinese job seekers in the U.S.” Busioness Library, 2007.
17. Fan, Ying. “Guanxi’s Conseguences: personal gains at social cost.” Journal of Businesss Ethics, 2002: 371-380.