Guanxi – Path to Glory

I was in Shanghai over the weekend to visit my brother and some of my business associates. Among topic of discussions was ways to connect with China’s profit pathway – quanxi – which loosely defined as ‘connections’ – a position of trust that is very tough from an outsiders to obtain.

During the politically charged period in the late 1980s and early 1990s – when China believed it really needed friends – a small number of companies ignored the controversies, are now rewarded with hefty market shares, growing profits and a position of trust. Now, it is crystal clear why most Chinese seem to spend inordinate amounts of time and money establishing, cultivating and maintaining their quanxi networks – guarded for they can last a lifetime.

This is the fifth years of my business involvement in China and I can testify to the fact that properly constructed guanxi relationships will help investors to identify future trends, potential profit opportunities and even the players best positioned top pursue them. In that sense, it is a bit like the proverbial ‘old-boys network’. It is also no surprise to see many guys that lack of quanxi will want to cry ‘foul’ when it comes to this aspect of business dealing. Quanxi is completely legal and it has been that way for 5,000 years.

If anything, my experience in Asia over the last 20 years suggests that people without quanxi are the ones who should be worried. Question that many people ask me how do I go about developing my own quanxi and business opportunities as those who know me, I hardly travel at most two or three times a year to land of dragon at most. Let me share with readers my three key guides – consistency, patience and deliberateness.

Most of China’s fastest growing and most profitable companies right now are the ones transitioning from a purely state-owned status. It is no surprise that these companies would have best success quanxi in areas the government has deemed to be so important.

Here in China, trust matters and it takes time. When I first came to China, a senior Chinese executive bluntly told me that he wouldn’t even begin to trust me until after would have met at least three times. Even then, he said, trust would be superficial, at best. In his view, we must see each other over a period of time to get to know one another. Only then would our ‘truest character’ emerge and that would put in place the building blocks for a relationship built upon long term trust.

Last but not least, one needs to fully appreciate the fact that while China has made more economic progress in the last two decades that it did in the previous 2,000 years combined, one who succeed here will be those who tackle this process in a steady and measured manner.

All in all, it proves that old adage that says ‘it’s who you know that counts’ – especially in China.