Guanxi, in very general terms, refers to the “personal network of relationships” between people. Most importantly in the above phrase is the word “personal.” Guanxi definitely spills over very significantly into business life and benefits companies, but it is – at root – PERSONAL in nature. Guanxi is developed between people – not between corporations.
Guanxi exists all around us, but plays an important role to differing extents in different countries. In China, thousands of years ago, ancient sages (including Confucius) recognized the importance of guanxi. Guanxi may be thought of as “significant and formalized” behavior in Confucian cultures – far more so than in the West.
In China, guanxi is complex, and becomes an important constituent of business activities, including relationships between individuals, customers, governmental institutions, investors, partners, suppliers, and even employees.
Definitions of Guanxi
Guanxi can be thought of as “special relationships.” Confucians think that both parties in a relationship can reach, over time, a win-win result in the interaction of guanxi. “Renqing,” an important factor of guanxi, means “human emotions,” “human sentiment” and “favor” and may be considered as follows in Chinese culture:
1. Renqing in Chinese means the emotions a person experiences in different circumstances. If one can understand a person’s emotions, and do what he or she likes andavoid what he or she dislikes, favor will be gained;
2. Renqing can also be used as a resource to be presented to others. When others accept your gifts or help, they “owe you a favor.” Renqing, as a social resource, includes not only money, properties and services, but also care for emotions;
3. Renqing also means the social norms by which persons in society get along with each other, and the manner in which we deal with others on a reciprocal basis to maintain guanxi between us.
In terms of business, guanxi may be understood as an informal contractual relationship.
Guanxi is often misunderstood by Westerners as “trading favors.” But guanxi is in fact deeply rooted relationships characterized by unfailing loyalty and readiness (enthusiasm, indeed) to assist. It is critical to make the distinction between loyalty and favors – favors are best viewed as the representative currency of guanxi – not guanxi itself.
In China, where guanxi has been deeply rooted, business cooperation and other interactions are often guanxi-oriented based on equal benefits to be realized in either the present time or at some future time by the individuals involved.
The Wenzhou Example
We may see an example in that many Chinese enterprises are family-based enterprises, and that people naturally cooperate with friends or colleagues they know well. Many enterprises based on families, are highly influential in China’s market.
The famous Chinese “Wenzhou Pattern” (Wenzhou is a city in Zhejiang near Shanghai) is the best example of cooperation based on guanxi. “Wenzhou Pattern” is used to describe the enterprises that Wenzhen families, relatives and friends jointly invest in. Wenzhouren (people from Wenzhou) are widely known in China as astute investors and people who “stick together” to help one another, deriving great intelligence, wisdom, information, and insight through their collective and cooperative efforts. Astute investors tread cautiously indeed when contemplating competition with Wenzhouren!