The Hindu Business Line : Guanxi — the art of doing biz with China

Chennai, Dec. 9 “It is not what you know, but who you know” or Chinese ‘Guanxi’ that can make or break a business in China. This was among the homilies that small and medium-scale businessmen were given at a presentation on the cultural aspects of setting up business in China by Prof Liyan Zhang from the Tianjin University of Finance and Economics.

China has policies and regulations that encourage investments, but it is Guanxi — “a network of useful contacts” — that will help an investor use the laws to advantage, Prof Zhang told the group of entrepreneurs at the conference organised by Confederation of Indian Industry.

More importantly, for small and medium-scale entrepreneurs local Government officials are crucial.

But this is not about keeping the politicians happy, clarified an entrepreneur who has been doing business with China. It is about networking.

Another businessman recalled how the organisers of a conference had asked him to come to China even if he did not manage to get a visa on time. He had decided to go. On landing in China, he was met by a representative of the organisers and a visa was arranged on the spot.

Network works

Prof Zhang said Guanxi is at the heart of a Chinese business relationship, one in which members of the network work within the system, helping each other and growing. You may get the paperwork right but without good Guanxi you do not get anywhere.

There were more such nuggets to come during the course of the presentation: “Quality is money. You get what you pay for” referred to what was seen in China as a very Indian tendency — bargaining. At a factory in China, she said, there can be a diverse range of quality for a product. In Chinese business practice, quality means money.

Communication is another major issue, “sometimes in China, ‘yes’ does not always mean yes, and ‘no’ may not always mean no.” This stems from the Chinese reluctance to argue strongly, she said.

For a business to succeed in China it is important that you get to know the Chinese. That calls for a lot of preparation. When a participant commented, “or you place your order and pray,” Prof Zhang replied, “that does not work in China.”

For those who want to know whether all this is worth it, the organisers put things in perspective. Ms Gayathri Sriram, Chairman, MSME Sub Committee – Southern Region, CII, said China just cannot be ignored. In the last three years it accounted for a third of the growth in world economy, it is the biggest buyer of commodities, and since 2003 its per capita income has touched $1,000 compared to India, where it was less than $500.

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