Guanxi. The First Word in Chinese Trade

By: Peter Bennett

A colleague once told me that a good indicator of economic confidence was the number of construction cranes on the skyline. If he's correct, Beijing is feeling good about its prospects, very good in fact.

According to figures recently published by the Associated Press, China's economy grew at a blistering 9.4 percent in the first three quarters of 2005 alone. Yet a pan-European business poll by parcel firm UPS revealed that almost a third (31 percent) of UK business leaders do not consider Asia to be an important trading or production market.

To ignore the headlines predicting the 'awakening of the Dragon' would be commercial suicide: the world economy is undergoing a revolution as a China-led Asia returns to its historic role at the centre of affairs, according to the Financial Times' Martin Wolf.

Few of us receive emails in Chinese, but I saw one last year which translated into: "I'd like to spend a million pounds with your company". A good excuse, I thought, to spend January in Beijing talking to business representative organizations and growing companies who want to trade with the west. There were things I know now which I didn't know when I boarded my plane from London to Beijing to meet my Chinese contact which everyone wishing to do business in China should be aware of. Let me explain.

There were no berths available on the night train from Beijing to Xian (famous for its terracotta army but fast developing other industries) but we soon found ourselves settling down to sleep as one suddenly came available. A few days later we dined in a restaurant which was so busy that there was a queue for tables but strangely we had been directed past the queue into a private dining room.

Not long after my arrival in Beijing I'd mentioned a long standing back injury was troubling me after my flight. The next day I was ushered past the waiting patients to be x-rayed immediately by one of the City's leading orthopedic surgeons. No money changed hands. The currency exchanged was based upon Guanxi (Pronounced "GWAN-shee") which literally means "relationships". In practice, "You scratch my back, I'll scratch yours". The exchange of favors.

My host, a local businessman whose family has lived in the same area of Beijing for centuries, runs several successful restaurants. He has Guanxi in abundance and I have lost count of the number of times his standing has made things happen which would have been impossible without his network. If you trade with China, or would like to trade with China, underestimate Guanxi at your peril.

It works at all levels from social engagements through business and into officialdom. Western corporations often place great emphasis on efficiency and financial performance as a guide to whether or not to trade with other entities. In China, a much higher importance is put on personal relationships. You do not need to be big and powerful to forge successful business relationships with Chinese executives but you do need establish the personal contacts first.

My advice is not to rely on formal written communications but wherever possible to talk to prospective contacts on the phone (using an interpreter if required) and, if at all possible, arrange to meet in person as soon as you think you have a mutual interest in trading. Return flights from London to Beijing are around 400 UK and once there, accommodation is cheap.

Time spent getting to know your potential partners will pay dividends down the line. Unless your hosts speak English well, consider hiring a face-to-face interpreter to avoid confusion and help initial meetings run smoothly. Their local knowledge of the City will also be invaluable as Beijing is huge.

My time in China was extremely productive. London Translations Limited, has announced an agreement with Beijing Sagive Translations Company Limited, one of the most respected and experienced translation firms in China. This will provide a crucial language 'bridge' to enable trade between our two countries. Crucially they will provide an English to Chinese service and we will translate Chinese into English.

Incidentally, I never found out how exactly we managed to get seats on a fully booked train but my host did mention that the wife of a comedian whose show was being played on TV in our carriage works at the train company and the comedian himself regularly eats in his restaurants!