Operating the Guanxi engine inside the Chinese arena

As we internalize the Guanxi engine metaphor and grasp that it needs 'fuel' to run, we will also recognize that, like any well-designed system, its inertia will continue running off alternative sources regardless. Chinese rituals were refined over the past five millennia, and every Chinese person knows how to behave to achieve the most within its confines. They don't resist what they cannot change, and they embrace their national identity proudly in the context of Chinese history, which is the longest continuous in human history. In practical terms, your Chinese partners are an integral part of the system, and depriving them of goodwill will compel them to seek alternatives in other parts of the local value chain.

When foreigners forget to add fuel to the Guanxi engine, their partners will extract it elsewhere. Westerners call it corruption, but here we call it 'goodwill extraction,' there is a direct cause/effect correlation with our maintenance of the Guanxi engine.

Operations Manual = National Characteristics (国情 Guóqíng)

Most things in China work differently, and we are responsible for learning and adapting to how things work inside this new field of play called the rules of the China game. Understanding Chinese psychology helps us keep our emotions in check, but knowing the rules of playing the China game is essential.

China has distinctive rules and regulations, tariffs and tax structures, and a unique security architecture. As with any new market, consultants and advisors help us navigate this new terrain. However, they don't prevent the adverse side effects of our emotional biases and lapses in control, a.k.a. emotional quotient (EQ). We must adjust for the geopolitical undercurrents that disproportionately influence questions and assertions from our Chinese counterparts, which will likely trigger a circular conversation and yield irreparable psychological penalties. Success is about winning or losing hearts and minds by becoming a pragmatic psychologist and discovering all of China's hidden treasures.

Lubricant = Face (面子 Miànzi)

Face or Mianzi is the 'lubricant' that keeps everything running smoothly inside the Chinese arena. In Chinese culture, giving Face is customary, even amongst close Guanxi connections, and a must for developing any new relationship intended to become beneficial, which is usually the only reason to get to know someone. The pragmatic aspect of Chinese mentality will naturally seek to give praise and other forms of goodwill to open doors to attain some form of benefit or favoritism in the future, and its pursuit is driven solely by habit and hierarchy. We shouldn't be surprised when our Chinese counterparts dismiss lower-level people, and we shouldn't misinterpret praise offered during the honeymoon period.

Hint: Our direct reports don't think we are brilliant or fantastic despite the words that come out of their mouths; this awareness is a psychological weapon in your arensal to win the China game.

Fuel = Goodwill (诚意 Chéngyì)

In Western culture, a quid pro quo may be unethical or illegal, while in Chinese culture, mutual goodwill exchanges are its lifeblood. Praise, sharing connections, and other beneficial offerings drive the Guanxi engine inside the Chinese arena. Goodwill is the proverbial fuel, and it demonstrates good faith (诚意 Chéngyì) in Chinese culture, which is the closest thing to our Western sense of developing trust. Westerners tend to trust those they perceive as honest, generous, and hard-working, while Chinese people only trust those with whom they have close Guanxi relationships.

Maintenance = Reciprocity (应酬 Yìngchou)

We maintain Guanxi and its associated advantages (好处 hǎochu) through the continuous exchange of goodwill, reciprocity, and engagement in social activities (应酬 Yìngchou). Remember that isolated activities will not translate into measurable benefits. Instead, continuous engagement in Guanxi-deepening activities elevates preferential treatment and the sharing of connections and inside information. Western cultures believe everyone should be treated equally, without preferential treatment, especially as it pertains to business, which is why doing business in China often feels dirty and unethical. We believe business should be relational, yet we measure everything transactionally. In the Chinese arena, transactions vary depending on the relationships. The most common example is the speed at which goods clear customs or are left sitting in a holding area indefinitely. It depends on whether you know someone or someone who knows someone working in customs and how many levels you are willing to reach out to your Guanxi connections.