GUANXI: The Art of Building Relationships in China

Sheida Hodge
Hodge International Advisors

Contrary to the title of the best selling book “The World Is Flat”, the terrain of international business is covered with hills and valleys of miscommunication and lackluster business results. Technology has connected us to almost everywhere in the world, but the efficacy of these connections depends greatly on creating a common perspective.

Many companies fail to achieve the objectives of their international business efforts due to ignoring the impact of cultural differences on the process of working and communicating together. The forward-looking companies that recognize the challenges of global communication, and proactively implement solutions, will certainly come out ahead.

China, for an example, with its mammoth economy flourishing from under the shroud of an ancient culture, remains one of the most promising and problematic places to do business. My first business trip to China was in 1986 while working for GE. During my extensive visit, I came away with a wealth of new experiences, and two new words – Nihau (hello), and more importantly Guanxi.

In literal terms, Guanxi means “the art of building relationships.” But for Americans seeking to do business in China, this translation is somewhat misleading. The idea of forced socialization – complete with lavish dinners, gifts, and maybe even an invitation to the US for more socialization – is often perceived as a waste of valuable time by American businesspeople who want to focus on the task at hand: completing projects and making deals.

However, the reality is that a true understanding of the concept behind Guanxi will shorten the process, and will get businesspeople to the goal of successful business results much faster.

Historically, the Chinese legal system fell short on providing recourse for unfair or dishonest business dealings. If your business counterpart didn’t do as they promised, there wasn’t much that could be done about it. Therefore, smart business dealings evolved by doing business with those you knew personally, or those who came from a reputable referral source. It became very important to business success to nurture a network of trustworthy connections. By appreciating these fundamental concepts, westerners can begin to understand why Chinese are so protective of their reputation and are more cautious in dealing with new business partners.

While the concept of Guanxi derives from ancient Chinese history, its basic values still linger today. The heart of Guanxi is building a relationship of trust and credibility. This is not necessarily accomplished by mere socialization, but by communicating substantive information about you and your company – proving to your Chinese counterparts you are a reputable source with which to do business.

Viewed through this lens, Guanxi seems less like a time wasting practice, and more like good common business sense. The key is to understand and supply the right information up front. After seventeen years teaching the ins and outs of international business, I’ve boiled it down to a simply BEST acronym. These four letters represent the basics that prospective partners will want to know about you and your firm:

Brand – your company credentials

Expertise – your qualifications and level of authority

Sincerity – your demonstrated care and commitment

Track Record – your background and connections


Their interest in your brand is simple: like most of us in the western world, the Chinese feel more comfortable dealing with large, well-known firms. Smaller start-up companies mean more risk and less comfort. Whether you represent a blue-chip firm or a start-up, be sure to let them know about your organization’s stability and other reputable clients.


This point speaks to you personally. Because authorities and hierarchies have dominated Asian history and culture, it is important for them to be dealing with the correct level at an organization. You can expedite the process by showing off professional credentials and demonstrating that you have the authority to close a deal.


In western cultures, we tend to think of people as sincere if they’re honest and they say what they mean. In Asia, where the social structure is based more on the group than the individual, this extends beyond clarity and into the realm of having your partner’s best interests in mind. Show that you aren’t just looking out for yourself and you’ll go a long way towards creating value for both sides. Accepting their social invitations, reciprocating, and paying attention to the human side of the equation will demonstrate this point.

Track Record.

Providing references, especially from those in prestigious positions, speaks to the heart of Guanxi and can make prospective partners much more comfortable than they would have been otherwise. If you have happy clients or friends in high places, don’t be afraid to show them off.

In the end, businesspeople around the world want the same things. With a bit of preparation and understanding, you’ll find you don’t need to spend a lot of time engaging in unproductive activities. You just have to build enough trust so both sides can move forward confidently – and that’s great advice in any language.