“Guanxi” stands for any type of relationship. In the business world, it is the network of relationships among various parties that cooperate together and support one another. “If you scratch my back, I’ll scratch yours.’ Often actions are performed to either show “we” want to get to know each other, we have a good relationship, or to get another party indebted to you.
With the right “Guanxi” (with the right people), a company or businessman can reduce troubles and get help when doing business in China. In other words, having good “guanxi” means you are more competitive.
To develop “guanxi,” you need time make friends and establish close relationship with important others (salesmen, shippers, officials, bankers) and the people dear to their hearts. You can do this by constant social interaction, doing small and large favors, or offering a small gifts when meeting. Your goal is to build a network of people close to you (a phone call away) that can help you when in need.
The Chinese prefer to deal with people they know and trust. The closer to the family, the better. With good “guanxi” in a close knit circle friends, you are expected to act on the up and up and respect your good friends. To do this, you have to make your company and yourself known to others with whom you want to build relationships and then start building. It could be built by gift-giving, but is often built with frequent interaction, and fulfilling your early promises, building up a good, reliable reputation.
Chinese work hard at developing their “guanxi” because it pays off in the end with a good reputation, loyal friends, and smoother business dealings. You may find out that although a business opportunity has recently been posted for the public to see, it is merely a formality to feigning “fairness,” but behind the scenes these opportunities have already been decided, through “guanxi.”
“Guanxi” can go wrong, too. Someone with “guanxi’ may ask for a cheaper price than your company can afford, making you look bad in front of your own boss or asking you for an invoice a little larger than the actual amount so that they can enjoy a little kickback. These put you in unethical situations, so it might be best to know the reputation of those you should to build guanxi with.