What Concept In Chinese Business Culture Is Based On Reciprocal Exchanges Of Favors

Guanxi: The Chinese Cultural Concept

One of the most important elements in Chinese culture is the concept of “Guanxi,” which is pronounced (jwan-see). However, while the literal meaning of “guanxi” is “relationships,” the notion as it is utilized and implemented in Chinese society is considerably more complex and inclusive than the literal English. The term “Guanxi” refers to the relationship that exists between one person and another, or between one party and another. However, and perhaps more crucially, the phrase implies a responsibility owed by one party to another, which has developed over time as a result of reciprocal social transactions and favors.


How DoesGuanxiWork?

In this sense, “guanxi” may be thought of as a form of cash that can be kept and spent between the two parties involved in the transaction. It is a resource that, like money, may be depleted, thus caution must be exercised in order not to overextend the “guanxi” that has already been formed. It is not necessary for favors to be exchanged in the same manner. When one person introduces you to another, it is not out of the question for that party to ask you to assist them in obtaining a visa for your country or enrolling their son in a foreign school as part of the reciprocity of the introduction.

If one is unable to meet a specific request, one must find another means to make apologies, such as delivering a little gift to the other person to express regret for not being able to assist them and that one still wishes to retain the friendship.

Why isGuanxiImportant?

In part, this is due to the reciprocal nature of “guanxi,” as well as its related duties, which is the primary reason why Chinese are hesitant to enter into deeper relationships with individuals they are unfamiliar with. In order to initiate such a relationship, you may find yourself in a precarious position from which it is impossible to recover. Furthermore, establishing “guanxi” with someone who subsequently shows to be unfit can ruin that party’s reputation (or cause them to lose face), therefore the Chinese would prefer not begin a connection with someone they do not already know.

It is therefore preferable, if you wish to initiate a business or personal connection with a Chinese individual or organization, to be introduced by a common acquaintance who can testify for your character.

Gifts should always be returned in kind, and they should be of equal value. Always use two hands to transmit and receive information. Photo courtesy of the United States Army Bandon Flickr is a photo-sharing website (CC BY.20)

Gift Giving andGuanxi

The reciprocal nature of “guanxi,” as well as the inherent duties that come with it, is the primary reason why Chinese are hesitant to get into deeper relationships with someone they do not already know well. A compromising position may be created in the beginning of such an affair, and you may find it challenging to get out of. Furthermore, establishing “guanxi” with someone who subsequently shows to be unfit can ruin that party’s reputation (or cause them to lose face), thus the Chinese would prefer not begin a connection with someone they do not already know well.

It is therefore preferable, if you wish to initiate a business or personal connection with a Chinese individual or organization, to be introduced by a common acquaintance who can testify for your character and integrity.

Whenever possible, gifts should be returned in kind and be of equal or greater value than the original.

Bandon, a photographer for the US Army Thanks to Flickr for sharing this image with the world (CC BY.20)

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China: what do you know about guanxi?

Even though there is no one definition for guanxi, a recent article in Business Line describes it as “China’s system of personal ties strengthened by mutual favors, which plays a crucial role in conducting business and navigating the government bureaucracy.” A successful business relationship is largely based on establishing positive relationships with those who hold positions of authority within a company or government function.

  • Sylvia Vorhauser-Smith, a global talent manager and Forbes contributor, traces its cultural roots back more than two millennia to the teachings of philosopher and statesman Confucius, whose theory has shaped much of Chinese culture.
  • As a result of this development, guanxi has grown into a crucial component of the Chinese social fabric and commercial world.
  • Guanxi is very much a silent contract defined by the long-term reciprocal granting of personal favors to one’s friends and acquaintances.
  • According to Luis S.
  • The fact that it is extremely personal in character rather than corporate or institutional in nature means that it can be difficult to sustain on a corporate level since it is dependent on the presence of a person who may depart, taking their strategic impact with them.
  • It is the case of Angela Chang, co-founder of major Chinese digital media technology company i-Vision, that most effectively highlights the importance of guanxi in Chinese business culture.
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A large part of i-success Vision’s can be attributed to Chang’sguanxi, which he developed while working at an investment bank and was passed on to him by a former client who happened to own one of the country’s most important national cable companies, which also happens to be one of China’s largest state-owned enterprises (SOEs).

In order to capitalize on her relationships and reputation, Chang arranged up connections and meetings across the SOE, ultimately resulting in the company’s acquisition of its first customer and business partner in the process.

What is the procedure for obtaining it? Vorhauser-Smith believes that the following factors are critical in “overcoming the Great Wall ofGaunxi”:

  • Learn Mandarin: a little goes a long way in this language. Use multilingual business cards to promote your company. Establish a list of the most significant stakeholders in your guanxi network. Meet individuals face to face and be prepared to share information about your own interests and family life with them. Offer words of encouragement, acknowledgment, and presents
  • Be patient
  • It will pay off.

The findings of a 2012 research on the role of guanxi in the experience of British joint ventures in China revealed that some corporations hired management teams of Chinese ancestry to connect with government officials and the local population. According to one of the participants, although there is no way for an individual to accelerate the growth of their own personal guanxi connections, a corporation that can afford to hire Chinese personnel who have the necessary networks in place may be able to achieve just that.

It is possible that repaying a favor will be difficult, immoral, and maybe even illegal because it is a type of debt.

Is guanxi becoming less important?

Because economic and structural conditions are changing, according to the authors of the aforementioned study, while guanxi is still of enormous strategic value for doing business in China, its relevance will diminish over time. As evidence, they claim that its strategic relevance has been overblown and that the issue has been thoroughly absorbed in the West, citing the widespread employment of local Chinese managers as evidence of this. An extensive number of studies are given in which researchers believe that China’s ongoing legal reform and liberalization will help to reduce the impact of guanxi in the long run.


Entry for a living reference work for the first time online: DOI:


The first item in the living reference work was published online in the form of a DOI (Digital Object Identifier).


  1. Burt, R.S., and Burzynska, K. (2017) Entrepreneurs in China, social networks, and guanxi are all discussed. Management Organ Review, Volume 13, Number 2, pages 221–260CrossRef Search Google Scholar for Chen, M.J. (2001). Inside Chinese business: a handbook for managers throughout the world. Harvard Business School Press is based in the United States. Google Scholar
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Authors and Affiliations

When it comes to business, Guanxi (pronounced gwan’ CH) is a Chinese phrase that refers to relationships; it is generally referred to as networks or connections that are utilized to open doors for new company and expedite transactions. A businessperson who is well-connected in the community will have an advantage over someone who does not have much in the way of guanxi. Guanxi is closely intertwined with Confucian philosophy – a philosophy that has shaped many Asian cultures – and is defined as the extension of one’s self to one’s family, friends, and society in order to create a harmonious community.

Guanxi is a term that refers to a duty that one has for another.

The exchange of favors between members of a network does not have to be the same for everyone.

How Guanxi Works

Guanxi is arguably best explained by the old adage, “it’s not what you know, but who you know,” which means “it’s not what you know, but who you know.” Various kinds of guanxi exist in the Western world, including alumni networks, fraternity or sorority affiliations, former and present places of employment as well as organizations like clubs, churches, and family members. Some notions in network theory are analogous to guanxi in the social sciences, such as the idea of information or connection broking by well-positioned individuals in a social network, or their social capital.

If you are bidding for a contract in a competitive environment and you are acquainted with someone on the opposite side of the transaction, it is only natural that you will attempt to take advantage of this connection.

If you are a CEO looking to make an acquisition, you will consult your guanxi at the golf club in order to discover a more expedient way to your destination.

Key Takeaways

  • “It’s not what you know, but who you know,” says the aphorism “it’s not what you know, but who you know.” Guanxi is a Chinese phrase that describes an individual’s capacity to connect or network for the goal of effective business networking. It is possible to endanger one’s reputation or create possibilities for corruption by abusing guanxi in business through aggressive or dishonest commercial activities.
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Special Considerations

Depending on where you conduct business and how aggressive you are, employing your guanxi may be either harmless or dangerous, depending on the situation. As a method of conducting business affairs in the Western world, it is widely accepted; however, if you do business abroad, you must be aware of potential conflicts of interest, whether governed by law or by a company’s code of ethics, as well as extremely serious cases involving the Foreign Corrupt Practices Act (FCPA). In China, where the art of guanxi is practiced to the highest level, relying on connections to get things going is the rule rather than the exception.

Business executives with connections in the government have participated in criminal behavior, which has resulted in severe repercussions.

Understanding the concept of ‘guanxi’

In China, personal relationships are everything. While you are establishing and developing your work connections, you may be requested to share tales and information that is unexpectedly personal in nature with your colleagues. Not being worried about being asked questions such as “how much money do you make?” or “what is your partner’s Eastern astrology symbol?” or “what are your religious beliefs” by a Chinese person you are meeting for the first time is important because it is all about building a relationship, which is an essential part of doing business in China.

  1. Having personal confidence in and a strong connection with someone is referred to as Guanxi, and it may include moral responsibilities and the exchange of favors with that person.
  2. awarding projects to a friend’s company rather than the most qualified firm).
  3. The Executive Director of Michell Wool, Mr.
  4. Michell, said: It is commonly translated as “connections,” “relationships,” or “networks” when used in this context.
  5. Guanxi may also be used to represent a network of contacts that a person can call on when something needs to be done, and through which they can exercise influence on behalf of another individual.
  6. Maintaining open “bureaucratic connections” can also assist enterprises in establishing themselves with the least amount of delay.

Businesses in Australia may, unsurprisingly, find it difficult to incorporate guanxi into their operations and operations management. Keep your eyes peeled for opportunities to network and keep in mind that the reciprocal nature of guanxi imposes an implicit responsibility to’return the favor.’

How to build guanxi

Building guanxi is a long-term endeavor that requires patience and perseverance. It is possible to do this in a variety of ways: General knowledge of China and its culture- Having a general understanding of China and its culture may be beneficial in developing and maintaining relationships. This can aid in the establishment of an initial link with a new Chinese contact, if one is needed. Obtaining a formal introduction is beneficial because Chinese people like to do business only with individuals they know personally.

The greater the social standing of your link, the more probable it is that you will be successful in getting introduced to the proper individuals and important decision-makers in your organization.

Regular visits, practically daily communication (ideally between CEOs/company directors), and plenty of socializing will be required to achieve success.

It would also be appreciated if you give out gifts that have your company logo on them.

If you have been invited to dinner at a business contact’s home (which is normally a reserved honor), arrive on time, remove your shoes before entering, and bring a present to share with your host.

When it comes to Chinese business models, trust and guanxi are more important than formal agreements, which can lead to feelings of dissatisfaction for some.

North Head’s John Russell serves as the company’s director.

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