Networking in China: Part I

Saturday, October 7, 2006 1:22
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Like Silicon Valley in the late 90s, Shanghai is a place on the move. Constantly!

For many, Shanghai is now the first stop in China, the first city to set up operations, and for those that stay it is important to get out and meet people. Fortunately, for those looking to build their “Guanxi”, there is always a networking event, there are always conferences, and there are plenty of opportunities to shamelessly promote oneself and one’s company over a few drinks and some canapés.

During my 15 years of Asia, there have been fewer topics more important that the role of relationships in business, and in China the word “Guanxi” is one of the first words many foreign executives will learn.

The meaning of Guanxi (关系) (as defined by Mandarin Tools) is relation; relationship; to concern; to affect; to have to do with; relations.

In real terms, it is your network of people; who you know; how many cards you have; whether potential customers know of your product; and, if you are in sales, who knows you.

Previously doing business in China meant a foreign executive (typically on a China trip) was interacting only with Chinese business men in China (whether for sourcing from, investing in, or selling into China) introductions were critical and relationships were coveted. Meetings with factory managers, bankers, government officials, and distributors were conducted in Chinese around large tables in rooms that had no heat or AC over scalding hot tea were conducted.

Meals were eaten, sites were visited, families were introduced, gifts were given, alcohol was consumed, and relationships were nurtured. It was the first step to doing business in China, and those relationships were critical to the future stability and success of operations.

However, in the last few years as more and more foreign companies have not only visited China, but invested in China, the role of relationships has changed. Whereas foreign executives once complained about the snails pace building relationships took, many relationships now are built on the business fundamentals of the deal being discussed, and thus are moving much quicker.

In many ways, government officials, manufacturers, distributors, and customers are all a bit jaded. Many have been visited many times by similar companies, all offering the same interest in investing in a particular area, buy a particular product, or partner with a particular company, and unfortunately, this has changed their level of excitement from ecstatic to muted as many did not put their money where their mouth was.

However, on the other side of the coin, the importance of relationships with other foreign companies is becoming more and more important. Due primarily to the number of OEMs entering China, there is now a new group of companies entering China that deal solely with other foreign companies, and thus need to have strong relationships with foreign companies rather than local companies. This is also true for many who are supplying services like freight forwarding, outsourced accounting, and a host of other services.

Over the next few weeks, we will continue this topic and highlight ways in which companies need to understand the importance of relationships, how the role of relationships is changing, and how to build their networks in China.

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