Relationship Building in China: Suppliers

By Biao Wang (MBA)

Camellia Universal Limited8 April 2011

Lomonosov Moscow State University, Moscow, Russia

Camellia Universal Limited 2011

Introduction

The relationship in China is called ‘guanxi’.

Having the right guanxi is fundamental for both foreign and Chinese enterprises to be successful.

The guanxi culture has existed, and penetrated deeply into Chinese business society, for several thousands years.

it is an important concept to learn and understand if one is to function effectively in Chinese business society.

What Is Guanxi?

Guanxi in China describes the network of relationships among various parties that cooperate together and support one another.

Why Guanxi Is So Important With The Chinese Suppliers?

In China, it is the right guanxi that makes all the difference in ensuring that your business with the Chinese supplier will be successful and long term.

By building the right relationships with your suppliers, you will minimise the risks, frustrations and disappointments that are necessarily possible in any such venture.

Your suppliers become willing to give you reasonable prices and good quality products if the guanxi is set up firmly

Guanxi is the intangible asset. It is one of the most important elements for any foreign business that wants to build a long-term partnership with its suppliers in China.

What Do You Need To Know Before Establishing Guanxi With The Suppliers?

You need to know and understand Chinese business culture, the general manners and customs and politics.

You need to recognise that the Chinese do not do business as you do.

Many business deals fail at the outset due to fundamental misunderstandings.

The toughest aspect of understanding a people is to understand their ethics, values, etiquette and protocol.

General Chinese Manners & Customs

Manners & Customs →The Chinese are very easy to get to know.

→ They are warm, generous, interesting, curious, wise & thoroughly rewarding people to have as friends & business contacts.

→ You will find that your Chinese supplier may ask quite a lot of personal information about you.

→ The Chinese supplier wants to know you more with a personal touch before doing business with you.

General Chinese Manners & Customs Regarding the Politics

→ If we are to build & facilitate a successful guanxi with the Chinese suppliers, we must learn, not only to leave our prejudices & negative opinions behind us.

→ but also to learn to accept & respect the ways (both cultural and political) of the Chinese.

→ You need to know that most Chinese are very happy & proud of China.

→ It is recommended that you don’t talk about the politics, especially the sensitive issues of Taiwan, Tibet & Tiananmen Square. Remember that you are doing business with the suppliers & you are not a politician.

How Guanxi Is Established With The Chinese Suppliers?

Gift giving Trustworthiness Friendship Face Being patient Learning some basic Chinese language Business dining and drinking together Business Meetings with the suppliers Contacting and visiting your suppliers

Gift Giving Small souvenirs are often exchanged. It is usual to wrap

the gift in red paper.

However choosing a suitable gift will challenge your perceptions of what is and is not proper.

Never give a Chinese gentleman a green hat.

Try to avoid giving things to Chinese that contain the number four.

Never give someone anything written in red ink.

Do not give clocks, knives, scissors or letter openers. Avoid white flowers.

Trustworthiness

If you promise certain things to your Chinese suppliers and deliver as promised, you are showing trustworthiness and the Chinese suppliers would be more inclined to deal with you again.

Friendship

Being dependable and reliable definitely strengthens the Guanxi with your supplier. It is like being friends, and friends can count on each other in good and tough times.

Face

Face is a very similar concept to ‘respect’.

How to increase face?

How to increase your own face?

Being Patient

Chinese business people act slowly by foreign standards.

The Chinese generally believe that foreigners are always in a hurry and want fast answers.

Patience is a Chinese virtue.

If you want to do business with the Chinese suppliers, patience is vital.

Learning Some Basic Chinese Language

It will be helpful for the Guanxi if you learn some basic Chinese language to indicate that you are interested in Chinese culture. → Hello (Nin Hao)

→ Thank you (Xie Xie)

→ Sit down, please (Qing Zuo)

→ Cheers (Sui Yi)

→ Miss (Nv Shi)

→ Mr (Xian Sheng) Call the surname first and then title. Surname

first to respect the ancestor

→ Good-bye (Zai Jian)

Business Dining & Drinking Together

Having a meal together with your suppliers is an important part of the Chinese business culture and is vital to the relationship building process.

It is very important for you to invite back the Chinese supplier to have a meal with you, before your business trip ends in China.

Using Chopsticks Smoking Drinking & Toasting Refusing the food Finishing the meal

Business Meetings With The Suppliers

Dressing

Arriving at the meeting location

Shaking hands

Exchanging business cards (Receiving and presenting)

Contacting & Visiting Your Suppliers

If the Guanxi is established with both parties, frequent contacts with each other foster understanding and emotional bonds.

The Chinese suppliers often feel obligated to do business with their friends first.

You should also go to China to visit them once or twice each year in order to facilitate a long-term relationship and ensure the relationship continues to grow stronger.

It is always recommended that you use the same team or intermediary on each visit.

Conclusion & Recommendation

Guanxi is a vital factor to learn if you are to be successful in China.

Building guanxi takes personal commitment and time.

It is fundamental to understand, implement and nurture guanxi with your suppliers in Chinese business society .

If you only remember three things, they should be: Guanxi ….. Guanxi ….. Guanxi.

Questions & Answer Time