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March 28, 2005

The Changing Value of "Guanxi"

When Westerners discuss Chinese business, they inevitably fall upon the venerable topic of indispensable “guanxi (关系),” or, in ready-bake parlance, “connections.” With a charming innocence, Westerners ascribe to the term “guanxi” an almost mystical power, as if it were a talisman to be worn about the neck. [The pin-yin method of romanization makes it very difficult for newcomers to the mandarin dialect. “Guanxi” should be pronounced approximately like “gwan shee.”]

Why? One with “guanxi,” it is believed, can get things done in China others simply can not. Many Westerner businessmen will regale the listener with stories of a Chinese colleague who, solely by virtue of his incredible “guanxi,” accomplished some task – helping an application through a government office, overturning a denial on a permit, etc. -- once thought impossible. Sometimes these stories ring true; at other times, I have been more impressed with the Western businessman’s willful ignorance to pierce to the root cause of the success.

A personal connection to a decision-maker, wherever on the globe, is valuable. But, it is presumed, Chinese hold far greater sway with any given connection than other ethnicities. There is more than just a grain of truth to that. Most Americans, according to my experience and observation, will generally not perform favors for even dear friends, unless either the request is logical or there is a direct and immediate benefit to the person who receives the request.

Chinese, on the other hand, are quite willing to perform favors -- without investing a great deal of ratiocination -- merely because a request has been made by a personal contact. Chinese are extraordinarily sensitive to the needs of their personal contacts – a faculty one might wish more Americans might develop.

To be fair, Americans open their hearts to strangers asking for assistance, while Chinese give strangers short shrift. The idea of “the public good,” if it ever existed as other than a traditional philosophical idea in the collective Chinese psyche, is in practice severely underdeveloped. As one Chinese manager said to me with no little shame as we walked through garbage strewn streets of Shanghai some years ago – “中国人最缺的就是公德心。[Chinese lack an awareness of the importance and value of the public sphere.]” That isn’t atypical of Americans: drive through the streets of Newark, New Jersey, and one can say the same.

But, really, how important is guanxi in China?

Influence works: pull strings whenever possible. However, while one might get some leverage through a personal connection, the value of guanxi is steadily on the decrease.

Just 25 years ago in China, political and economic power was concentrated in the hands of a very few. There were but a handful of decision-makers. One’s connection to that personage of power might arrange a transfer to a desired work unit, a larger apartment, enhanced medical care, etc.

With experience, one learned to take claims of pie-in-the-sky guanxi cum grano salis. [Perhaps I should not mix my metaphors, or, for that matter, sweet with salt.] In the 1980s, every Chinese waxed eloquent about his contacts, knowing full well their importance to the listener, when he very often but blew the proverbial hot air.

Some people were indeed very close to the center of power. And yet even they were difficult to access; they rationed their guanxi; they negotiated for value in return. They did not give it away to any and all takers.

But enough of the past. In short, that world – where a needle decided for a field of haystacks -- has begun to fade from view. With China's tremendous economic development, there are far more decision-makers now than there have ever been in China’s modern past, and their numbers continue to grow. Some people will still be well plugged in far better than others. But no one can possibly know all of the decision-makers, or even, for that matter, a substantial portion of them. A lock on guanxi is a relic.

Yes, one must acknowledge the vestigial value of guanxi. As I stated, pull strings whenever possible. But do not focus on it. Instead, in the China of today, we must look to the development of a far more important business skill -- that of creating relationships of trust with strangers.

More on how this may be done to good effect in upcoming posts.

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Posted by: bill bishop at March 29, 2005 8:12 AM

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