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The Importance Of Guanxi (relationship) When Doing Business In China

In China, Guanxi (relationship) is a complicated field. A special feature of doing business in China will be that Guanxi (relationship) in China will have to include relationship with the government body, investors, partners and even relationship with your own staff, so when doing business in China, it is important for foreign investors to learn to coordinate with the China government, especially establishing good relationship with government bodies dealing with foreign trade and economic cooperation.
Governmental procedures for foreign investors in establishing investments in China is extremely complicated, thus if one is unfamiliar of the procedures, one will delay his/her business opportunities. Therefore it is important for one to be familiar with the investment procedures before carrying out his/her investment in China. A safer and more appropriate way will be to seek help from local organizations familiar in the same field of business or consultant firms who are able to provide professional advice and assistance. Willpower and patience may be essential for an investor to be successful, however it is necessary for one to require help from professional bodies to ensure that success will be achieved.
Seeking a suitable local cooperative partner can be a shortcut one undertakes when developing the China market. Many investors had established Sino-foreign joint venture, Chinese-foreign cooperative enterprise, etc. as a stepping stone to enter the China market, thus which investment mode to choose one will have to accord with the enterprise's characteristics and has to be the most suitable for developing the enterprise’s business and assisting its march into the China market. Some investors who had made investments in China for many years proposed to small and medium-sized enterprises to take one step at a time when making investments. They should not be too ambitious initially. It will be best if they establish cooperation with local partners so as to reduce their investment risk. Even though China’s investment environment is constantly maturing, domestic regional developments imbalances still exist, therefore building cooperation with local companies will be the most ideal way to protect foreign investors’ interests and investments.
China’s labour market very much appeals to many foreign investors. This is because on one hand, labour cost is low, and on the other hand, through 20 years of reform, China’s workforce has become matured and their skills have been constantly upgraded, especially in the coastal cities. Educational development is undergoing at a tremendous pace in China, thus it is no longer difficult to hire high quality labour force in China today. Many successful foreign investors have even credited their success in China to their China’s local staff. One big problem that is causing headache to foreign investors is how to maintain good relationship (Guanxi) with the local staff. First of all, top management should cultivate the company’s vision and values into the employees because what the local people are taught under China’s educational system may crash with the foreign management system. Thus only by letting the employees understand the company better can allow the company to function better.
Chinese emphasize very much on courtesy and face-saving. This has to do very much with China’s traditional culture, and courtesy can be seen in every aspect in the business world. Being courteous to government official, cooperative partner and staff is thus essential. Senior president of China’s Siemens Company has rated courtesy as the top importance while summarizing his China’s experiences. Besides displaying courtesy on general commercial affairs, respecting traditional customs and practices is also vital. Chinese people are very hospitable, but their self-esteem is very strong and they pay very much attention on how other people view them and their attitude towards them. This phenomenon can be seen greatly in Northern China, which is associated with ‘face-saving’.
While doing business with the counterpart or partner, it is essential to give face or respect to the partner or the other party, so that in this way strong cooperation can be fostered and the business will be able to grow and last. Many foreign corporations have strict requirements on their staff in their home country, however in China, this management method may backfire. Past experiences have shown that this kind of strict management method may not be suitable for the Chinese’s gentle personalities. Employees’ morale will be affected and they may lose the willingness and motivation to work in the company. Thus handling organizational relationship in China context is a necessary skill for foreign investors to acquire in order to handle interpersonal problems in the Chinese way. It is important for foreign investors to be flexible in their management and be sensitive to China’s culture in order to devise an ideal management system best suited for their companies’ organizational culture.

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