Part three:
Social Relationships and the concepts of
guanxi
and
mienzi
Today’s entry is about “social relationships” and the concepts of
guanxi
and
mienzi
. It is of extreme importance to become familiar with the Chinese way of interact with other people to be more effective in this particular environment. Chinese Culture has an important impact on conducting business here. In conducting business Chinese people adapt their strategies to the new situation in a more flexible way in respect to their western counterparts. This is another aspect of the influence of the local (millenaria) culture. I am sure that, though not all the Chinese business people have persued advanced studies at the University, they all have read the text of Master SunTzu, “Ping Fa” (
The Art of War
) (
http://wellreadman.com/2011/07/28/why-read-the-art-of-war/
). These concepts, and the content of the text I mentioned (and of other Chinese classical texts, especially the words of Confucius, contained in all his texts, have something to teach us) should be read before to initiating a business adventure here in China. Otherwise, the foreign investor will always be at a disadvantage when interacting with a Chinese counterpart.
In particular when you talk about social relationships in China you are talking about the idea of guanxi. Many foreigners in China are perplexed about the idea of guanxi. Some view it as bribery, some try to engage in it; most do not understand it. In truth the term can even be slightly ambiguous to Chinese themselves. But for understanding how it affects business it can be viewed as a way of building long term friendships with the idea of helping each other. Guanxi helps you build goodwill with your business or government contacts where the relationship you have formed supersedes everything else. It is not like a business relationship in the West which is very formal and goes little beyond business.
In China a business transaction should not just consist of a foreign business sending lawyers to review a contract, sign some papers and take some photos. Instead, you need to build ‘guanxi’, a relationship, that is personal and builds trust. Maybe you will have a banquet where the baijiu (Chinese rice liquor) is flowing. Maybe you will go out for a rousing karaoke session. Whatever the case, the point is to build a relationship and trust that you use in the future to get things done. (An interesting article about the concept of “guanxi” is available at the following web-page:
http://www.wantchinatimes.com/news-subclass-cnt.aspx?id=20101222000039&cid=1504
).
In the current situation in China were laws are sometimes not uniformly enforced guanxi relationship building is key to not only accessing valuable information but also to finding a way around obstacles. If your business team cannot operate using guanxi it is highly suggested to find a consultancy firm or trusted Chinese partner that can, in order to make business operations more smooth.
Apart from
guanxi
another vitally important aspect of relationships in China is the idea of
mienzi
(i.e. ‘face’). In many ways ‘face’ is similar to the Western idea of respect but it has a much deeper cultural meaning. Losing one’s ‘face’ in front of others is a major embarrassment for a Chinese person. As a result no Chinese wants to lose their face and will if necessary go to great lengths to keep it. If you are a serious about doing business with a Chinese partner you should never put them in a position where they might lose their face. This is the ultimate insult to them and the only thing it will do is derail all the effort you have already given to produce the relationship in the first place. If you must correct them or show an error do it in private and give them an opportunity to amend their mistake so face can be saved. Show respect and earn respect but never destroy the respect others have in your business partner.
These two particular aspects of Chinese social relationship are particularly important during negotiations with a Chinese company. Sometimes initially negotiations are going to go slowly in China. Instead of becoming frustrated realize that this is your time to work on your ‘guanxi’ building. The goodwill you can accumulate through building guanxi relationships can greatly increase your ability to negotiate as your Chinese counterpart will feel more comfortable with your willingness to engage them on such a familiar level. Once negotiations get going always show your respect and while you can argue a point never make someone else lose their face. As mentioned above the results can be disastrous.
If my followers are interested in this topic and in the others which I have already treated so far, some more details can be found in my work about M&A and foreign investments in China (
http://www.kluwerlaw.com/Catalogue/titleinfo.htm?wbc_purpose=Basic%2525252525252f?ProdID=9041140484
).
– Cristiano Rizzi