The right way to Guangxi - Tips and Research 12th September 1997 Back to News Menu Asian Business Strategy & Street Intelligence Ezine Join the APMF email list Monthly updates on new content

Much has been written about the importance of guanxi to doing business in Asia, particularly in the Chinese business dominated economies of the Hong Kong SAR, Singapore, Taiwan (ROC), and of course, the People's Republic of China. It is a recurring theme in the forum, especially in Boye Lafayette de Mente's "Asian Code Words", the APMF/MCB Special Issues on Asian management, and more informally and from an "on the street" perspective, in Blanchard's Oriental Travel Journal. Simply put, guanxi is the special case of Chinese business relationships and contacts that needs to be understood and worked within to successfully do business and management in most countries in the region. While every business person working in Asia has had the importance of guanxi stressed, and notice very quickly how business success is more related to contacts and relationships than in other regions, research to validate its' effectiveness is limited. A recent article in Organizational Dynamics entitled Achieving business success in Confucian societies: the importance of 'guanxi' (connections) by Yeung I Y M, Tung R L, provide some empirical evidence. The abstract from Anbar Management Intelligence reads.... Examines the importance of 'guanxi' (connections) to the success of economies with a strong Confucian basis, e.g. Hong Kong, suggesting that this success will be transmitted to China; compares aspects of guanxi with networking in Western societies, categorizing these as motives, reciprocation, time orientation, power differentiation, the nature of power and sanction. Suggests that guanxi shares some characteristics with nepotism, and reports on the significance of guanxi and its contribution to business success; looks at the building and maintenance of guanxi relationships, commenting on elements such as the nurturing of long-term mutual benefits and the cultivation of trust. Draws on findings of 19 Hong Kong companies in establishing that there is a correlation between the possession of guanxi and financial performance, but believes that, while necessary, it will be an insufficient condition for success in mainland China. Subject(s): CHINA, NETWORKING, SUCCESS, HONG KONG, FINANCIAL PERFORMANCE Database: TMA: Top Management Abstracts Style: Survey, Comparative/evaluation Indicators: Research Implication * Practice Implication ** Originality ** Readability * Total Number ****** The World Executives Digest also kindly summarises the key findings of the research.. Guanxi is a necessary but insufficent condition to long-term business success in China. In the established phase of business operations in China, technical competence gains importance. It is important to build strong relationshionships with right individuals, particularly becuase guanxi relationships are preson-specific and cannot be transferred. Non-Chinese firms often have to resort to intermediaries to gain the proper connections in China. The tendering of favours, particulalry the offer of short-term gains, is essential, but not powerful enough to maintain long-term guanxi relationships alone. To maintain long-term relationships, an integrated approach is more effective. Trust is essential to long-term guanxi maintenance. This can only come about if there is a genuine attempt on the part of the foreign investor to understand Chinese culture.

© Asia Pacific Management Forum 1997
The views expressed here may not necessarily reflect those of Orient Pacific Century or partners

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