This chapter introduces the relevant behaviours that underpin the business dealings of the Chinese as a consequence of their business and social environments in general, and the following influences in particular:

Since the remaining chapters not only detail those business dealings but also abound with practical examples of such behaviours, this one includes sufficient examples only to clarify a general point. In addition and by contrast, however, many examples and case studies are given specifically of working with the Chinese in anticipation of Chapter 10.

Like the previous chapters this one attempts to give a sufficient underpinning knowledge to allow a better understanding and, consequently, practical implementation of the ‘how to do what’ more effectively when working with the Chinese.

Ritual behaviour

Although many Chinese are prepared to forgive your lack of expertise – especially the younger and better-educated ones who may have travelled overseas and hence understand what it is like to be on the other side of the fence – there are those who still lay great store on adherence to the rituals of gentlemanly politeness that distinguish the Confucian Superior Man; and for whom outward form may be more important than inward motive.

Hence the reason for devoting so much space in this and subsequent chapters to the correct observance of Chinese business etiquette.

CONNECTIONS(GUANXI)

Many cultures and languages have ideas or words that are difficult to express or translate: guanxi is one such.

Concept of guanxi

In China, guanxi is what oils the wheels of life or glues together society in general, and business in particular; and, of the various attempts elsewhere to define it, I commend the following defintions of guanxi:

• 1.‘Relation(ship)’, as between husband and wife, or governments; ‘ties, connections’, as in social interactions (Concise Chinese-English Dictionary, Oxford University Press, 1986).
• 2.‘Membership credentials, backdoor connections’ (New Chinese-English Dictionary, China, 1996).
• 3.‘A sort of quid pro quo, ‘you scratch my back, I’ll scratch yours’ kind of arrangement’ (Dealing with the Chinese, Scott D. Seligman, Management Books 2000, UK, 1997, p. 45); ‘a tit-for-tat relationship between two people’ (Chinese Business Etiquette, Scott D. Seligman, Warner Books, USA, 1999, p. 194).
• 4.‘Something linking two people who in some way have developed a relationship of mutual dependence’ (Encountering the Chinese, Hu Wenzhong & Cornelius L Grove, Intercultural Press, USA, 1991, p. 61) to which I would add ‘and trust’ – such as founded in attending the same school or university; or coming from the same geographical origin or lineage.
• 5.‘A special personal relationship in which long-term mutual benefit is more important than short-term individual gain and contains the key elements of indirect relationship between two people through proper introduction by a third party, and direct relationship between two people who trust each other and the contact person… It is the mother of all relationships’ (Chinese Cultural Values and Their Implications in Business Transactions, Wei-ping Wu and Li Yong – in: Doing Business with China, Kogan Page, UK, 2000, pp. 192 and 193).

In its simplest terms: guanxi is a form of nepotism akin to the old boy network or old school tie in the UK – but with the added dimensions of:

• mutual and obligated dependency, as per the Confucian ‘Golden Rule’ of reciprocity
• lasting for life.

Hence, it differs from – and, consequently, should not be confused with – the Western practice of networking, which tends to be superficial, short-term, and results-oriented.

Good relationships are so important to the Chinese that they tend not only to treat them as a measure of personal ability and influence; but also to despise anyone who has no connections, and reject them as only half-Chinese.

This applies equally to foreigners, whom the Chinese will expect to understand and follow the rules of guanxi; and in reverse – that is: the more a foreigner or ‘outsider’ builds relationships in China, the more they will be accepted by the Chinese as being one of them or an ‘insider’.

Rules of guanxi

Such rules are:

• the Confucian values of altruism, harmony, integrity and reciprocity
• mutual trust, loyalty, durability and long-term commitment, intimated above
• ‘face’ and hierarchy, explained below

for breaking which the penalty is a loss of trust and, consequently, of ‘face’ leading to ostracism from the network – which in itself is the incentive and self-regulating control mechanism for obeying the rules.

Forms of guanxi

There are basically two forms of guanxi.

• Passive form: acquired through natural means with ‘insiders’ – such as via family, school, university, marriage, work, clubs, and neighbourhood etc, as intimated above.
• Active form: acquired by exchanging gifts and favours with ‘outsiders’.

For foreigners, it is the second form that they need to observe, according to the practice described below, and the protocol detailed in Chapter 4

Levels of guanxi

There are also two levels of guanxi: personal and corporate.

Whilst guanxi naturally originates from the former, for on-going business purposes it needs to develop into the latter, since personal guanxi is of value only for as long as the relationship between the individuals concerned remains mutually beneficial and/or interdependent. Otherwise, as soon as you or your Chinese counterpart move, retire or die, all that hard work has been in vain, and your successors have to start all over again.

This is not to say that your personal guanxi is not important – quite the opposite: it is vital. But you should use it as a springboard to build corporate guanxi with your counterpart organisation(s), who will behave similarly. Indeed, some Chinese may not distinguish between the two, and use personal guanxi to secure not only personal gain but also corporate advantage.

Thus do not be surprised if an individual Chinese suggests that your and their organisations clinch a totally unrelated deal purely on the basis of your relationship. After all: the prime value to China of building guanxi with you – as a ‘foreign devil’ – is to acquire whatever technology, expertise etc that your organisation can contribute to her progress.

In summary: to be successful, guanxi must be as much ‘business to business’ as ‘person to person’.

Foreigners who forget this, and boast of and rely on their personal guanxi, do so at their peril.

Practice of guanxi

In business, guanxi is the personal networking that gains you access to elusive contracts, finance, goods, information, markets, people and services by means of exchanging favours rather than money. In other words, it is not bribery, given the swift and severe penalties meted out for economic crime, mentioned earlier. Rather, it is a ‘circle of friends’ who can call on and trust each other to do mutual favours: they for you, and – do not forget – you for them.

Thus, as elsewhere, success in business depends as much if not more on whom you know, rather than what – a reality overlooked by those results-oriented foreigners who mistakenly concentrate on finalising contract details rather than spending time building personal and corporate relationships, as the Chinese do, when negotiating business deals.

It is important, therefore, for foreign business(wo)men to understand the following differences:

Hence in China ‘business may flow out of friendship whereas, in the West, friendship may flow out of business’ (Doing Business in China, Tim Ambler and Morgen Witzel, Routledge, London, 2000, p. 198).

However, as I discovered, guanxi is not always a function of seniority.

The most common and straightforward method of using guanxi is via ‘a friend of a friend’.

For example: if you wish to meet Mr X, and his right-hand Chinese employee has guanxi (direct or indirect) with yours, ask the latter for an introduction via that guanxi. If successful, your right-hand employee may gain ‘face’, as explained below, if they were not senior enough to have connected with Mr X without you. This approach is akin to Newton’s Cradle, using contiguous connections to move up the chain of influence.

This is a fairly straightforward example – unlike the one quoted by Michael Harris Bond in Beyond the Chinese Face: Insights from Psychology, p. 59.

’If an individual (X) needs a resource from a stranger (Y), he may be able to obtain it by pulling on his relationship with an associate (Z), who is also associated with Y, so long as Z is indebted to X and Y is indebted to Z. Z may then be able to repay the debt which he owes to X by allowing Y to repay the debt owed to Z indirectly by granting Z’s request.’

One word of warning: never forget who it was who acquired a connection for you, or rather ‘lent’ that connection to you. To take over another’s connection without further involving the introducer could cause resentment and close more doors than it opens. Thus, if you continue to meet a friend of a friend, keep the first friend informed and appear eternally grateful: otherwise the latter could turn that friend against you.

Which goes to show that: guanxi may be hard to build, but even more difficult to recover.

Hazards of guanxi

To maintain it, therefore, be sure to keep ‘stoking’ your guanxi, keeping favours in balance. It is not an inexhaustible supply – as some foreigners have mistakenly believed to their cost – but, like a bank account, needs deposits to cover payments.

Otherwise, one of two things may happen – your Chinese connections may:

• 1.at best: withdraw their goodwill
• 1.at worst: pre-empt you by requesting a favour that you cannot grant – for example, ranging from putting in a good word at your Embassy in China to hasten their visa application or at your local university to secure a place (neither of which should cost you money); to paying for their travel or study costs.

Be careful, therefore, not to exaggerate the scope of your guanxi in your home country and/or give the impression that such guanxi will necessarily yield their desired result. Otherwise you may have to chose between the devil of refusing – with the attendant dangers described below – and the deep blue sea of having to ‘cough up’. Fore-warned is fore-armed!

Building guanxi

As illustrated above, guanxi is hard for foreigners to build, not least on account of the:

• time needed to establish trust between parties who, as a consequence of their geographical – and possibly linguistic – separation, may meet and/or have direct contact only infrequently
• Chinese attitude towards them.

Meanwhile, in order to ‘prime the guanxi pump’, I suggest you consider the following methods – which can only temporarily kick-start rather than permanently buy into guanxi, since, by its reciprocal nature, guanxi cannot be bought:

Collectivism

As a result of not only this importance placed on good relationships (guanxi), but also their:

• extended Confucian concept of filial piety
• current political heritage in general, and previous collectivism of Maoism in particular
• lack of privacy or personal space

is it any wonder that the Chinese are primarily social beings – that is: members of a group, to which they owe allegiance, rather than individuals?

Combined with the emphasis, explained below, on:

• harmony to save ‘face’
• keeping a low profile to preserve modesty
• obedience to hierarchies

the Chinese put:

• group harmony and dynamics before individual behaviour, ambition and assertiveness – which they see as a threat
• the preservation of insiders’ guanxi before the conflicting interests of outsiders – which they do not necessarily consider dishonourable or corrupt behaviour.

For an example of this see Chapter 2,> – Family and Friends.

All of this poses the following ‘chicken and egg’ type question:

• Is collectivism the result of or impulse for guanxi!
• Is guanxi the result of or impulse for collectivism?

Consensus

Add to the above recipe the further ingredient of their uninspiring education system and it will come as no surprise that the Chinese prefer collective decision-making and consensus as a means of taking advantage of collective wisdom and building group confidence.

Thus, in business, the Chinese will debate issues until agreement is reached on a course of action, and expect individual group members to accept and implement the group decision regardless of their personal views.

Hence, ‘agreeing to disagree’ is not an option in China.

Intellectual property rights

Confucius disapproved of writers profiting from their work (e.g. by way of royalties or the protection of copyright), contending that the public sharing of knowledge was for the collective good of society and, conversely, restricting its use was unhelpful to society. After all, who is to say that person A’s idea is original, just because they wrote it down first?

As a result, intellectual property rights (IPR) and similar (e.g. patents) have been regarded in China as unnatural and anti-social – until recently, that is.

With the emergence of digital technology and mass-copying techniques, the Chinese have had to introduce appropriate regulation, which is good news for foreign businesses who might otherwise be deterred by being exposed to what they would consider – but the Chinese used not to – as plagiarism.

FACE (MIANZI)

The concept of ‘face’ differs between distinct languages and cultures.

In China, ‘face’ (mianzi) has been variously:

• translated as: ’self-respect’, ‘prestige’ and ‘reputation’ (Concise Chinese-English Dictionary and New Chinese-English Dictionary) and ’honour, integrity, privilege, respect and courtesy from others’ (What is it in the face? welcome-to-china.com 2002)
• defined as: ‘the regard in which one is held by others or the light in which one appears’ (Dealing with the Chinese, Scott D. Seligman, Management Books 2000, UK, 1997, p. 50); ‘an intangible commodity that is vital to a person’s reputation, dignity and prestige’ (Chinese Business Etiquette, Scott D. Seligman, Warner Books, USA, 1999, p. 198).

In other words ‘face’ to a Chinese person is quite simply their ‘status’ and to lose it, and incur shame, is the worst thing that can befall them.

Whilst this may seem similar to elsewhere in the world, what distinguishes ‘face’ in China from other cultures is that it can be:

• not only lost, saved or won
• but also given by others, as explained below.

Losing and saving ‘face’

It follows that you should never treat the Chinese – friends, colleagues or strangers – in any way that would publicly demean them, as summarised below, and thus would cause them to ‘lose face’.

Otherwise, you run the very real risk of losing their cooperation; suffering retaliation; and losing the respect of bystanders and all those people that the other person tells – which will consequently cause you too to ‘lose face’.

In such an event, seek the counsel of a Chinese intermediary as to how to ‘restore face’ – both of the other person and yourself.

To ‘save face’, therefore, any criticism should be positive, and delivered privately, discreetly and tactfully – that is, in a mutually face-saving manner, a la Western ‘one minute reprimand’ – which makes a veritable minefield of reviewing and disciplining Chinese colleagues, discussed later in Chapter 10

Gaining ‘face’

Whilst losing or saving ‘face’ implies the active involvement of a third party – as described above – gaining ‘face’ is something you can independently instigate – typically by acquiring status symbols.

Giving ‘face’

In China, as mentioned above, ‘face’ may be given to someone by a third party – for example, when person A praises person B’s work to the latter’s boss. In particular, the Chinese lay special store by ‘face’ given them by foreigners, whom they may consequently and subsequently regard with particular favour.

Whose ‘face’ is it anyway?

In theory, based on the Confucian ‘golden rule’ of reciprocity, the Chinese try to protect the ‘face’ of others as well as their own.

In practice, however: ‘face’ is so important to them that some may care more about their own than that of foreigners, and try to save the former at the expense of the latter, even their boss. In such an event, the best (i.e. mutually face-saving) defence is to invoke ‘face by proxy’, explained below.

‘Face’by proxy

In the same way – described above – as your guanxi with one person also represents the guanxi between your and their organisations, your ‘face’ is also your employer’s ‘face’, and vice-versa.

In certain circumstances, the ‘face’ that someone wins or loses may reflect vicariously on their known or close associates and/or employer by their ‘basking in reflected glory’ or ‘cowering in reflected shame’ – for example: the members of a winning or losing work team.

This is where ‘face’ meets guanxi and collectivism, described above: since the actions of individuals reflect not only on themselves, but also on all of their immediate group and close associates, being linked to others’ failure could undermine one’s own sway, as no one wants to be tainted by failure, albeit vicarious.

On the other hand sharing in others’ success may not necessarily build influence.

Saying ‘no’

A sure-fire way of upsetting the applecart in your dealings with the Chinese is for you to say, or put them in a situation where they are compelled to say a bald ‘no’. (An example of the latter might be asking for an impossible favour.)

Not only will this cause a ‘loss of face’ for them, with the attendant risks mentioned above, but also shut the door to further discussion for you – since ‘no’ means ‘no’ to the Chinese, for whom any later change of mind or heart would be a sign of weakness and, thus, further ‘loss of face’.

‘No’ is the antithesis of guanxi, explained above: once broken, a relationship is hard to re-establish.

You should, therefore, try to leave yourself a way out and forward, by taking a leaf out their book and imitating the Chinese as follows:

Besides, Chinese prefer circumlocution to blunt speaking – a ‘fault’ they perceive in, and for which they criticise, Western entrepreneurs and negotiators.

Harmony

Although the last tactic may appear underhand by Western standards, it could equally be a case of a dishonourable means justifying an

honourable end – such as, sparing the other person’s ‘face’.

Indeed, unlike in the West, the Chinese do not consider lying to be wholly dishonourable if used to avoid conflict and preserve harmony in personal relations, which transcend each party’s particular version of the truth, whatever that may be.

As a general rule: in such cases, the greater good of the other outweighs the interests of self.

Making mistakes

Similarly, the Chinese will use identical tactics as a ‘cover up’ – such as when they make a mistake, or do not know, or want to own up to something. For an example, see the film: The Yangtze Incident.

Conflict management

As explained above, ‘losing your cool’ is not acceptable in China: indeed, it may exacerbate the situation – for example, by making whomever is opposing you even more determined not to grant your request, as well as losing respect for you.

Rather, on the:

• one hand: state your annoyance and reasons objectively
• other hand: allow the other person a face-saving way out.

One such method is to use a mutually acceptable third-party or intermediary to convey bad news – which, in China, is not a ‘cop out’ under such circumstances, but an acceptable form of mediation that saves both parties’ ‘faces’.

This is especially true when a foreigner needs to give bad news to a Chinese, to avoid the added indignity of ‘losing face’ to a ‘foreign devil’.