Above: Did you know that only 1087 Terracotta Soldiers have been found. Let me introduce Terracotta Soldier No.1088 :)
Guanxi and Business in Mainland China
WHAT MBA PROGRAM DIDN'T TELL YOU ABOUT BUSINESS IN CHINA
Chinese are known for their hunger for education. In mainland China expensive MBA and EMBA programs have become top fashion. Learning Porter and others, finance, workshops, then certificate and title.
Often the main reason to join those programs is not learning. It is hope of making extensions to their personal Guanxi net. Participants know, that in Chinese business the product (or service) is only 50%, the other 50% is Guanxi, relations.
Chinese MBA and EMBA programs talk about Guanxi, instructors have certainly thought about it. But even the instructors from Singapore, Hong Kong or mainland China can't teach it. Probably nobody can.
CHINESE GUANXI
It's not a new invention. It's more than links, networking or connections. In past Guanxi used to be the basic construction element of social structure in China. The origin of Guanxi is exchanging favors which includes many kinds of help, from housing to jobs. Old times Guanxi was slow but not static, it was a continuous process.
Today Guanxi has become essential business enabler in Chinese market economy. It occupies the core of Chinese business culture. Products compete with features and prices, then Guanxi directs the selection.
ABC INTO GUANXI
Before market economy era business in China was different. It was possible to sell high margin products which were not necessarily matching to customer's need, just if Guanxi was done right.
After a decade of transition towards market economy, learnings have made Chinese buyers less humble, and knowledgeable of what they want. Matching products are needed.Domestic companies climb the value-add and have created hyper-competition with their narrow profit margins.
For success in today's China, the product needs to be right, the price needs to be competitive, and Guanxi must be built and in place.
China is getting closer to Western business based on sales process and buying process, but Guanxi makes, and will make still for long time, the difference.
GUANXI - RELATIONS
It is kind of art. It's about trust. It's personal asset, private, but it's still a network. It can be old and permanent or new and situational. It's about favors given and to be paid back, based on emotional linkage. It's about mutual interest and win-win. It provides excitement.
Guanxi is not bribing, but it can initiate it and be inter-related especially when the favor is paid back in cash (Note: Chinese could fight bribery with aggressive and fair pay plus bonus system to their key personnel).
Guanxi may require money resources. It may involve private meetings with no memos. It can be in a very ambiguous format. Sometimes the needs and favors are not communicated openly. Personal ability is needed to read each others mind correctly and quickly, in a situation.
Guanxi leads to gentlemens' agreement, which is stronger than signed documents as an agreement. In business, it's related to selling and buying, but internally it can be part in organizational promotions, and when roles and tasks are assigned. At highest level Guanxi can even take use of media and sets rules which enable reaching the goals.
TYPES AND PURPOSE OF GUANXI
1. Long term connections based on
- Childhood friendship
- Family ties, kinship
- Social connections: classmates, grandfather’s friend, friend’s friend
2. Short term relationships based on exchange of short term benefits. Guanxi can be built and it can die right after the benefits become realized. In this case there is no personal appreciation towards each other in the relation. Persons involved see that the advantage is used-up, and there is no need to keep relation further.
3. Evolving new relationship. People are changing, their positions are changing. Nobody has 100% fixed Guanxi. Continuous build-up and maintaining efforts are needed. Business trainings like EMBA and MBA programs, can provide opportunities to have new ties, thus extending personal Guanxi network.Purpose of Guanxi is to seek convenience and access to business possibilities. Once the favor is offered and accepted, the other party is normally expected to pay back. People who receive favors have to be careful before accepting them. They need to estimate if they are able to pay back.
Guanxi is targeted towards the persons who have the influencing and decision making power. Usually negotiations take longer because of Guanxi.
GUANXI IN THE WEST
Relations are always important in the business. In the West, laws, rules, regulations and systems are different, but version of Guanxi can be found. Influence the influencers, Right message to the right people, by professional consultants.
In the West, influencing influencers is an open way of working. In China, working on Guanxi is confidential. Western theory is not the same as in Chinese Guanxi as there is no obligation of favor payback.
GUANXI AND FOREIGNERS
Foreigners have only little hope of participating Guanxi in China. Even a foreigner with very good Chinese language skill, will not be able to understand and interpret hidden nuances of that part of Chinese communication. Foreigners may speak Mandarin but they don’t have the ability to read Chinese mind in a way natives do.
LAOWAIA foreigner, who can understand Chinese culture and knows about Guanxi, a LaoWai, may become a problem by raising questions.
LaoWai may be seen as a risk by Chinese colleagues, if some things which are meant to be hidden, become recognized but not accepted.
Foreigners can't and are not expected to handle Guanxi, it's too pure Chinese art. For foreigners it's enough to know about it but let Chinese master it. Foreigners can have other roles.
1. For deal-making foreigners have two roles in China: technical information provider, and to participate open and public events and meetings. Often foreigner's role is no more than just “decoration”, overall limited to ritual.
2. For business development in China foreigners with their knowledge and decisions have the key role. Such activities and judgments are crucial. Then their main tasks should be to safeguard the bottom line and to provide technically reliable solutions.
3. Western way of management in Chinese branches and fluent communication with the headquarters needs foreigners.
Sales in China needs Chinese staff, industry knowledge, and local way to deal with the customers. Western CRM systems to map sales details are not wanted as Guanxi is too personal to open up. Skillful and wide scale Guanxi is a company benefit in doing business in China.
Epilog
GUANXI IS THE CORE OF CHINESE BUSINESS CULTURE
MNCs AND GUANXI
For multinational corporations in China, Guanxi is a daily must. Their business influence helps them having access to higher level Guanxi. Corporates invest on PR units (sometimes called Corporate Relations) with professional relations managers to take care their established social assets, Guanxi. MNC's with Chinese research units should understand that Guanxi can't help in innovation.
SMEs AND GUANXI
For SMEs Guanxi is more based on limited personal connections. Effective Guanxi builder becomes the key force for the company business. Motivation is important, as Guanxi goes when the person leaves.
ENTRY TO CHINAWhen planning business entry into China, companies need to consider Guanxi when recruiting personnel and selecting partners.
To estimate Chinese persons's potential ability to Guanxi contribution, these are some important factors: family, grow up environment, education, personality, ability to make friends, trustworthiness, social flexibility, ability to deal with different kinds of people, smart with fast brains, persistent, and humble when needed.
WTO AND GUANXI
WTO can help to regulate Chinese business environment but it will not change Chinese way of domestic business. China will be modernized with Western technology, but it will not abandon Guanxi in its social context. In China the product (service) is still only 50% and Guanxi the other 50%.
LEARNING GUANXI
There is no training for Guanxi except living in Chinese environment. No MBA or EMBA course can help to prepare for complex Guanxi situations that might be ahead. Learning Guanxi is always a personal process, a real life process for building face galleries. In today's China, Culture Revolution has also strong role in business.
FUTURE
Chinese Guanxi is not "a thing of past", it is alive, dynamic and dominating. We will see Guanxi evolution in business in China. Guanxi is Chinese art and core of the culture at its finest and deepest. Guanxi is the key enabler for business in China.
Will Guanxi become cornerstone for Chinese business development and sales abroad, in U.S. and EU? Most probably yes. Will Guanxi be able to provide breakthrough into western customer base, break between old loyalties? To be seen.
BeijingMan aka Kippo
List of BeijingMan Postings
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Terracotta Army in Xian
PICTURE STORY - Searching for Clay Soldiers
Over 500M people have already seen Terracottas before I did my trip to Xian in Shaanxi Province. My trip was just few days. Xian has 8M people, it's capital of Shaanxi Province, 36M people.
XianYang International Airport was new but far (40km) from city. Weather was dusty and city felt crowded. Private sightseeing was easy and not overpriced. Xian's city wall looked good. Trip photos below.
Above-1: Xian. Main street seen from hotel.
Above-2: Xian. Main street.
Above-3: Xian. Main street.
Above-4: Xian. Main street.
Above-5: Xian. Main street.
Above-6: Xian. A wedding model.
Above-7: Xian. Main street.
Above-8: Xian. Main street.
Above-9: Xian. Sweet eatings and sweet earnings.
Above-10: Xian. Still counting.
Above-11: Xian. Slippers.
Above-12: Xian. Goose heads?
Above-13: Xian. City center.
Above-14: Xian. City center.
Above-15: Xian. What's hot?!
Above-16: Xian. A fashion show!
Above-17: Xian. Big Wild Goose Pagoda was originally built in 652. This is officially rated as AAAA (four*A) tourist attraction.
Above-18: Xian. At Big Wild Goose Pagoda.
Above-19: Xian. At Big Wild Goose Pagoda.
Above-20: Xian. At Big Wild Goose Pagoda. Balloons - not enough lift.
Above-21: Xian. At Big Wild Goose Pagoda. Serious, weather was a bit too dusty for my eyes and throat.
Above-22: This is HuaQing Hot Springs, 30km from Xian. During Tang Dynasty (618-907) this was the place for romantic affairs of Emperor XuanZong and Ms. Yang Guifei.
Above-23: HuaQing Hot Springs. Statue of Yang Guifei. Emperor XuanZong visited here for her over 30 times.
Above-24: HuaQing Hot Springs. Lotus-shaped imperial pool & coins.
Above-25: HuaQing Hot Springs. Pool info, click to enlarge.
Above-26: HuaQing Hot Springs. At Nine-Dragon Lake, the dragons.
Above-27: HuaQing Hot Springs.
Above-28: Xian and Terracotta Army. Actually, replicas.
Above-29: Xian and Terracotta Army. Working with the army.
Above-30: Xian and Terracotta Army.
Above-31: Xian and Terracotta Army. The owen.
Above-32: Xian and Terracotta Army. Outcome.
Above-33: Xian and Terracotta Army. Clay ladies are my favorite.
Above-34: Xian and Terracotta Army. Weather was a bit dusty.
Above-35: Xian and Terracotta Army. Clay soldiers are here. It is said that altogether 8000 clay soldiers was made during 12 years by 1000 men by the order of China's founder, first emperor YingZheng.
Above-36: Xian and Terracotta Army. Tourist group.
Above-37: Xian and Terracotta Army. Clay soldiers, made in 300 B.C. Manufacturing process was modern: first the parts, then assembly, and finally personalization.
Above-38: Xian and Terracotta Army. I bought a book "Awakened Qin's Terra-Cotta Army" and autograph on it by Mr. Yang, the farmer who found clay soldiers in 1974. Autograph came by additional price as Mr. Yang didn't get finder's fee.
Above-39: Xian and Terracotta Army. Pretty static and silent view, but proof of it all long ago.
Above-40: Xian and Terracotta Army.
- Add this to to-do list.
Above-41: Xian and Terracotta Army. It's bye-bye to Terracotta Army and Xian. Clay soldiers stand straight and clean and life goes on.
Xian and Terracotta Army
+ Xian City Wall is "photogenic"
+ Terracotta Army has many tourists but no long queues
- Airport is far from city center
**** OK TARGET FOR TWO DAYS PHOTO SAFARI ****
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© BeijingMan aka Kippo 2008, 2009
Guanxi
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