The Chinese Corporate Culture: why is “guanxi” so important?

Corporate culture plays a critical role in shaping the work environment, decision-making, and overall success of any organisation. In the first case study, “Recruiting for a multinational enterprise in China”, we have seen many differences between western culture and the Chinese in terms of organisational values, communication styles, and leadership expectations. Therefore, in this article we will focus on the Chinese corporate culture, we will talk especially about “guanxi” (关系), illustrating Chapter 4 in the book: “Understanding cross-cultural management”. 

Power: hierarchy

The hierarchical structure of Chinese society, as well as company, age, position or title, determines how people are treated differently when they meet unexpectedly. In China, individuals are expected to obey the organisation. In business meetings, people will enter the meeting room according to their rank, and senior managers will usually be able to lead any negotiations or discussions. In addition, Chinese people will introduce themselves with their full title and company name after their name. 


It is important to respect the order of hierarchy. Senior employees are given more respect. The instructions of the supervisor are strictly followed. Questioning this order is seen as a sign of disrespect, especially if doing so may make the supervisor feel "faceless”. Consequently, public criticism should be avoided. 


Face (“lian”,脸) and face (“mianzi”,面子)


The notion of  “mianzi” (面子), meaning “face”, should be considered in business dealings. But, we can differentiate between two concepts meaning “face”, that is “lian” (脸), the literal meaning of face, and “mianzi” (面子), an abstract concept of face. The first one, symbolises the confidence that society has in a person's moral character. The second one,  represents the society's perception of a person's reputation. If a person loses "lian” the direct result may be the loss of trust in the social network. If "miazi” is lost, it means the loss of power or authority.

 

If a person causes someone to "lose face" through public humiliation or disrespect can seriously damage the business relationship with that person. Similarly, complimenting someone in front of others is highly respected and can help with negotiations and establish good working relationships.


Relationship (“guanxi”, 关系)


“Guanxi” and relationship building are the key to succeed in China, and long-term relationships are considered more valuable than fast or quick transactions. Business agreements are often only secured when trust is established, based on mutually beneficial relationships. Having good “guanxi” with the authorities can be very helpful in order to avoid difficulties and setbacks.


In addition, Chinese business culture values trust and loyalty, often built over time through strong personal relationships. Unlike Western business practices, which may prioritise contracts, data, and legal safeguards, Chinese enterprises put the emphasis on the strength of the interpersonal connection between business partners, in China, we also call it a “personal network” (人脉), which can be very helpful for unforeseen circumstances in the future. This is where guanxi becomes crucial. It is a form of social capital that operates on reciprocity, loyalty, and mutual benefit, shaping the way deals are closed, disputes are settled, and alliances are formed.


Also, building strong guanxi provides companies with access to resources, market opportunities, and insider knowledge. Therefore, it is favourable to have good contacts with Chinese business partners when it comes to relationship-building, especially with the government.



My experience


Last summer when I was in China, I attended a meeting with my uncle with the objective of learning some communication and social skills needed for working with Chinese business partners. Meetings for discussing matters of a contract are usually held while having a meal, in an informal way, most of the time you have to drink beer or wine as a way to show respect to the business partner. 


Several international partners were present in that meeting. They shared some thoughts with me about the corporate culture of the company they were working in, some of them were in the HR department and they faced a similar challenge as the case of Sinotrading Ltd. while recruiting people. They could not understand the way that the Chinese employees evaluate in the recruitment process. As a result I told them that in China, the practice of hiring through personal connections is seen as ensuring trust and reducing uncertainty, while outsiders may view it as lacking meritocracy. Nevertheless, as far as I am concerned, nowadays the latest generation looks down on people who work in the company due to connections and not because of their abilities. Consequently, this type of recruitment through connections is becoming less and less seen. 


Regarding the communication style, as I was borned and raised in a Western country, my uncle explained to me that Chinese communication is often described as “high-context,” meaning that much of the information is conveyed implicitly rather than saying something directly. They may rely on non-verbal cues, context, or shared understanding. This contrasts with “low-context” cultures, like those in many Western countries, where communication tends to be more straightforward and explicit. Therefore, my uncle reminded me that I should think twice when I was going to say something.


Furthermore, he told me about some survival tips in the Chinese drinking culture that I did not know before, even though I used to interact with Chinese people in Spain. He said that if you cannot drink, you should bring up the fact at the beginning of the dinner, and request a pot of tea for yourself. Then, when the dishes are on the table, you have to let older people eat first, or if you hear an elder say “let’s eat”, you can start to eat. Chinese dinners and drinking social events tend to go on for hours. 


Moreover, when clinking glasses, the younger person should always hold their glass lower than the senior folks. This not only applies to business situations, but also to family dinners. 干杯 (“gan bei”) is simply Mandarin for ‘Bottoms up!’. It’s not really ‘Cheers!’, although nowadays the younger generation uses it as cheers as well. You can also ask “干了?” “gan le?” to see if you are to finish your glass or say 随意 to indicate that each person can drink as they like.


Ultimately, toasting is a technical task. Be sure to make a toast and show your appreciation, especially when drinking with Chinese leaders. “我敬你一杯” (wo jing ni yi bei) is a sentence that you can use to say when you toast to a specific person, showing your respect to that person.



Conclusion


To conclude, in Chinese corporate culture, relationships, particularly through the concept of “guanxi”, are essential for achieving success. Deep-rooted in the values of hierarchy, respect, and trust, “guanxi” is the key to how business deals are made, partnerships are established and disputes are solved. This relationship-driven approach differs from the contract-heavy, data-driven methods often found in Western business cultures. As highlighted through my personal experience and the case of Sinotrading Ltd., guanxi emphasises the importance of loyalty, reciprocity, and long-term connections in building successful business networks.


Understanding and respecting hierarchy, maintaining face (“lian” and “mianzi”), and mastering the art of indirect communication are crucial for anyone looking to succeed in China's corporate landscape. While the younger generation is beginning to question the tradition of hiring through personal connections, “guanxi” remains a powerful force in business dealings. By building strong, trust-based relationships and following the cultural differences of Chinese communication and corporate etiquette, companies and individuals can discover more opportunities and navigate the complexities of doing business in China.


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