Essay by yinwenboUniversity, Bachelor'sC+, May 2004

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Thinking about doing business in China? Before you begin an understanding of "guanxi" is of paramount importance. One of the most crucial business decisions an organization has to make when it intends to make investments in china is getting the right advice. The right advice has a lot to do with "guanxi". It literally means "relationships" and it is an important concept to understand if one is to function effectively in Chinese society.

In order to make your products presence in China last, and ensure your business expansion successful in the long run, you must understand one of the most important elements of running your business operations in China - the concept of "guanxi". Understand this is more important than all the work researching, establishing foreign offices, and making initial contacts with freight forwarders. Even after completing your first successful move into this vast market of opportunity, you will find all your efforts pointless and fail terribly in China without this practice.

Technically, "Guanxi" stands for any type of relationship. In the Chinese business world, however, it is also understood as the network of relationships among various parties that cooperate together and support one another. The Chinese businessmen mentality is very much one of "You scratch my back, I'll scratch yours." In essence, this boils down to exchanging favors, which are expected to be done regularly and voluntarily.

The Chinese and Western cultures conduct business differently, even if, on the surface, transactions seem to be the same. The Chinese prefer to work with people they know and trust, so are less inclined to simply close a deal. With a strong relationship, however, you can be trusted and even favored. This relationship extends between companies and also between individuals at a personal level on an ongoing basis.

Guanxi, translated as 'social...