I have been reading some of the China blogs lately – there are a lot of them – and have seen a few posts about “guanxi,” (关系）what is literally translated into English as “relationships,” but which really means “connections” This is one of the first words that you hear or learn when you do business in China. Guanxi is simply knowing the right people in the right places i.e. connections. Doing business in China used to be all about guanxi. In the 80s and 90s when certain products were under quota for shipment to the US, a quota could always be obtained by simply picking up the phone and working ones contacts. I used to see this happen all the time when I worked in the textile industry in China. If my boss needed to ship an order of bed sheets but he didn’t have a quota – because quotas of home textiles were usually filled by April each year – he would spend the entire day on the phone, the result being that he usually got the quota he needed.
As China has become a more legalistic society, guanxi has diminished value and for this reason some China bloggers and business people question its efficacy at all. These people say that all you need to succeed in China is good business sense and that guanxi nowadays accounts for next to nothing. I strongly disagree (as do others I have talked to ). Doing business in China is still very much about guanxi. I often call on people I worked with fifteen years ago to ask favors, to point me in the direction of a supplier or perhaps get me a favorable price on a product I am sourcing. Earlier this year, I found a factory that had a competitive price on product I was sourcing but the factory did not have the requisite export license. I ran this by a lady I used to work for and she said “no problem” and told me that she could arrange shipment of the product if I wanted to order it. This was quintessential guanxi at work.
In fact, I don’t know if I have ever done business in China when guanxi was not used at some point to overcome a hurdle. It is synonymous with doing business in China. Although guanxi may account for fewer back-door maneuvers in large, cosmopolitan cities like Shanghai or Beijing, it is largely how business is conducted in many rural places in China. It is true that you can do business in China nowadays without guanxi . But it won’t be easy.