My audience is mostly interested in sourcing and QC issues in China. What should you do about the supposed power of personal connections (“guanxi” in Chinese)? NOTHING.
Guanxi is no more than a network of connections, Chinese style. The sort of connections that build trust and allow shortcuts (“no need for inspections, right?”). The sort of contact that expect returns for favors (“we hurried up to stay on schedule last time, so this time we can be a little late, right?”) Exactly what foreign buyers should avoid…
China is usually a dog-eat-dog environment where no one cares about the other parties at stake. So a network of trusted parties is so unusual, it deserves a special name, right? Maybe. But it is a dangerous distraction.
Importers usually do not need to cultivate personal relationships with their suppliers. Of course it helps A LOT to regularly spend time with them, and it hurts A LOT to be rude and condescending. But that’s all you need to know.
What is the mistake most foreign purchasers do? They give TOO MUCH weight to personal relationships. They should use their common business sense, and keep a cold head. Most Chinese exporters are used to dealing with foreigners, and after all you are the client… Why should you adapt to them?
So, how should you deal with your Chinese suppliers?
You don’t need to be their friend. You should keep verifying their job, because trust has nothing to do with this. You should react and ask a lot of questions when red flags appear. You should not feel obliged because of a good dinner or because the salesperson is so nice. See a previous article (Relationships with Chinese suppliers: be clean!) about this topic.
What we need is not a special term for personal relationships. We need a word for the I’ll-stab-you-in-the-back-as-soon-as-it-is-immediately-rewarding-to-me-and-I-don’t-care-about-you attitude that most Chinese businesspeople display with anybody outside their immediate circle.
If one special Chinese cultural concept is important, it’s “face”. When a Chinese supplier says “it’s not my fault, the problems are caused by my materials supplier”, it means “I can’t send the materials back to him, because he would lose face and hate me for that — so we used his junk anyway, and in the same way we expect you to accept our substandard products”…
What do you think?
Update: I should link to a China Briefing post about this same subject: It’s not about Guanxi. It’s about your Business Model and Due Diligence, by Chris Devonshire-Ellis. Good stuff!