How East is meeting West
Guanxi. It's the first word any businessperson learns upon arriving in China. Loosely translated, guanxi means "connections" and, as any China veteran will tell you, it is the key to everything: securing a business license, landing a distribution deal, even finding that coveted colonial villa in Shanghai. Fortunes have been made and lost based on whether the seeker has good or bad guanxi.
Now, like so many things in China, the old notion of guanxi is starting to make room for the new. Businesspeople—local and foreign—are tapping into emerging networks that revolve around shared work experiences or taking business classes together. Networking that once happened in private rooms at chichi restaurants now goes on in plain view—at wine-tastings for the nouveau riche, say, or at Davos-style Get-togethers such as the annual China Entrepreneurs Forum held annually at China's Yabuli ski resort. By tapping into these informal groups, Western companies can theoretically improve their understanding of the marketplace, hire the best talent, and find potential business partners.
Guanxi goes back thousands of years and is based on traditional values of loyalty, accountability, and obligation—the notion that if somebody does you a favor, you will be expected to repay it one day. One of Asia's most successful businessmen, Hong Kong billionaire Li Ka-shing, has parlayed his guanxi particularly astutely over the years, in the process winning valuable licenses and permission to build huge real estate developments. Playing the guanxi game is still imperative, and especially for foreign investors.
Many of China's networkers meet through an American or European MBA program. Gary Wang attended Insead, the famous French business school outside Paris. Today he runs a YouTube wannabe called Tudou that was built largely on connections made at B-school. His partner, Dutchman Marc van der Chijs, was married to one of Wang's classmates. A fellow alum who worked at Ogilvy & Mather Worldwide helped out with public relations. And another Insead grad, Helen Wong, a partner at Granite Global Ventures, helped Wang raise $8.5 million after a friend heard him speak at the China Europe International Business School (CEIBS) in Shanghai. "Without knowing all these people through Insead," says Wang, "Tudou probably never would have happened."
Executive MBA programs, all the rage now in China, have become Guanxi Central. Targeted at senior executives and high-powered entrepreneurs, the programs are attracting some of China's most successful businesspeople. "It's important to have friends in different industries and meet people from different cities," says Zhou Junjun, who runs the Chinese operations of a South Korean systems integrator and did an Executive MBA at the Cheung Kong Graduate School of Business in Beijing.
Multinational companies, of course, provide rich opportunities for networking, too. Ogilvy Public Relations Worldwide holds an annual party for former employees, many of whom now work for O&M clients, including Lenovo, Johnson & Johnson, and solar-panel maker Suntek. McKinsey has plenty of alumni who have moved into senior posts at major companies and startups. "Obviously, they became a valuable network for us," says Andrew Grant, who runs the firm's China practice in Shanghai.
If one thing has remained the same for foreigners in China, it is this: Cracking the guanxi code still takes hard work and perseverance. Networking at an alumni barbecue or wine tasting goes only so far when trying to build relationships of any lasting value. After the first 30 minutes at these functions, say people who have attended, foreigners and locals almost invariably break off into separate groups.
What's more, Chinese businesspeople are more experienced and globally savvy than they were just a few years ago. They're looking for business connections who can help them expand outside China or get their company listed on a foreign exchange. "People want something more professional and strategic from their relationships," says Li Yifei, Viacom's chief representative in China. "They want to know how good your guanxi is back home."