Guanxi is a Chinese term, generally translated as “networks” or “connections”. Although guanxi is often characterized as uniquely Chinese, similar relationships occur in other nations, especially in East Asia.
In China guanxi has become especially significant in the last fifty years because it provides individuals with a patterned, structured set of relationships that to some extent replace the social networks of family, village, and clan that are more difficult to maintain in the face of population relocations, urbanization, and Westernization.
Guanxi is a mechanism for dealing with social uncertainty in a complex social environment.
Guanxi has been a significant element in Chinese business relationships for several hundred years. Wide webs of guanxi tie Chinese businessmen and Chinese firms into a cohesive and functioning economy. The success and even survival of many businesses rests on the establishment and maintenance of guanxi.
For Western businesspeople, the idea of guanxi is a useful reminder that trust, understanding, and personal knowledge can be vital components of economic relationships.
The development of guanxi is not something that takes place instantly, and this can be one of the frustrating aspects of doing business in China for non-Asians who are accustomed to striking a deal and moving on.
Most guanxi relationships are based on individuals’ having something in common, a phenomenon called tong in Chinese. The commonalities may be the fact of having attended or graduated from the same school, having the same place of employment, working in the same industry, or coming from the same village or region. Guanxi relationships have a strong emotional element, something easily overlooked by outsiders.
The essence of guanxi is that each relationship carries with it a set of expectations and obligations for each participant. A guanxi relationship may lead a person to feel obligated to help someone. Those who meet these obligations gain face and status and expand their guanxi network. Refusing to help is a sign of inhumanity and can bring disgrace. Guanxi involves the notion of honor and respect, two core values in Chinese society.
There are a variety of customs and practices in the West that reflect concepts similar to those used to explain guanxi, concepts and rules that define the relationship between individuals and groups. For example, traditionally European etiquette required a person to be introduced by a mutual acquaintance, never simply to strike up a conversation with a stranger, even at a private event.
Nonetheless, in the West ties tend to be less strong, less structured, and less based on expectations. Old or distant relationships are also less important in the West than they are in China.
The main reason is that Western People are acting on the short term. They want to strike a deal and move on.They still have not learnt from the results that came out of a tournament that was organised to solve the so called iterated Prisoners Dilemma.
The Prisoners Dillema is a game in which two players may each “cooperate” with or “defect” (i.e. betray) the other player. If two players play the Prisoner’s dilemma more than once in succession (that is, having memory of at least one previous game), it is called iterated Prisoner’s dilemma. Robert Axelrod created popular interest in his book The Evolution of Cooperation (1984).
The best strategy was Tit for Tat, developed by Anatol Rapoport. It was the simplest of any program entered. When you use Tit for Tat the only thing you have to do is offer cooperation. If the other is not cooperating retaliate, forgive and start to cooperate all over again.
I think you understand what I want to show. If we involve the Chinese notions of honor and respect, offer cooperation, forgive and (this is very important) leave people that don’t do this out of our networks we will create a cohesive and functioning economy.
It is simple! Just as simple as the Strategy of Tit-for-Tat and just as simple like many other things in life.