Contracts or Guanxi?

Contract or Guanxi

While Doing Business in China, it is not unusual to be asked if you are married or single, how much money you earn, or have you gained weight. Dr. Caryn Voskuil provides examples of the major difference between Chinese and Western business cultures

Not long ago, I was having dinner with some colleagues. After the meal, one of them turned to me and remarked that I should consider getting plastic surgery for the bags under my eyes. Because this is my third year in China, I was not shocked or hurt (though my pride was a bit wounded), but I was again reminded of one of the interesting differences between living here and in the West: the issue of what is considered ‘personal’ and what is ‘private’ – particularly in business and work relationships. While I make no claim to being a specialist in this field, I will make some observations based on my own business experiences while living abroad.

In China, it is not unusual for colleagues, bosses or subordinates to comment on one’s appearance or to ask about one’s personal life. For example, I was once told by a student that I seemed to be getting fat. Others have asked me if I am married (or more surprisingly, WHY I’m not married!). It is not unusual for students, co-workers or clients to ask if I have a boyfriend, or if I am a Christian. I have received unsolicited advice from many people with whom I work regarding my eating habits, my clothing, and my sleeping habits. I am regularly told not to drink cold beverages, to wear warmer clothing, not to take certain types of medicines, not to consume caffeine during certain times of the month, to drink more hot water, and not to use air conditioning. Last month, a colleague that I was working with for the first time asked me how much money I made! It seems that one’s personal habits and private life are, in many ways, matters of public concern in China.

In the west of course, one may discuss such things with friends or family. It is also possible to have ‘friends’ at work with whom you discuss personal issues. However, in the workplace, such comments would be considered particularly boorish from a colleague or superior, and would be completely unacceptable from subordinates. Privacy is taken so seriously in American business that there are laws which make it illegal for a boss to ask an employee about most personal issues when hiring such as religion, age, marital and family status, height, weight and disabilities. Asking how much money a co-worker makes can be grounds for dismissal in many companies, and at the very least is considered uncouth. This is because in the west, business is considered an activity based upon the logical application of business principles to one end – making money, and good business people are considered to be those who are not swayed by personal issues unrelated to the business matters at hand.

Doing Business in China, however, is based largely upon personal relationships and connections (关系-guanxi), and asking such questions is a way to show sincere interest in your colleagues, and to build closer relationships. As my colleague, Theresa Gao, wrote in her article, Chinese Business Culture, it has been this way for centuries, so such questions not only sound completely natural to most Chinese, they are considered appropriate. This focus on the ‘personal’ when one is Doing Business in China explains other aspects of business behavior that are often baffling to westerners. For example, it is not unusual for someone who is doing business in China to do so without a contract, though this would be generally unacceptable in the West.

In the West, a contract assures that all business associates conduct themselves according to the laws and to their agreements. One need not know an associate ‘personally’ to trust that they will adhere to the contract. But in China, personal relationships between associates are the foundation for business relationships, and I often wonder if contracts seem to imply an absence of trust to Chinese. Perhaps in the minds of Chinese business people, contracts are not really ‘necessary’. Certainly this is not the case in large business ventures and joint ventures, but in consulting relationships and business agreements that are smaller in scope, I have noticed that contracts are rare, and even when they exist, often are not closely adhered to. Having good relationships with your associates and clients, then, is of the utmost importance!

Other interesting business practices in China that differ from those of the west involve ‘socializing’ with clients and associates. When Doing Business in China, it is common for business associates to socialize together after work hours. This again is done for the purpose of cementing ‘personal’ relationships or guanxi, with a mind to improving business relations. I have also attended many business banquets where a good deal of drinking takes place. While it is considered bad form to encourage associates to drink alcohol in the West (due to the increasing awareness of the negative health effect of alcohol), Chinese colleagues will fill your glass repeatedly, encouraging you to toast to mutual friendship and camaraderie. Again, this is a friendly gesture meant to promote good-will. If you do not wish to drink, you can simply toast with water or juice (as I often do).

Another issue that surprises many westerners is the ubiquity of smoking in the workplace (and everywhere else) in China. Illegal in much of the West (and considered a violation of ‘personal’ space), smoking in the work place is also technically ‘not permitted’ in many workplaces in China – but such rules are patently ignored. Again, no offense is intended – the Chinese seem to be much more tolerant of such behaviors than westerners, and are much less focused on the concept of ‘personal’ space. One might argue that the stress caused by feelings of resentment is almost as bad for one’s health as second-hand smoke. So let them go for now – I feel certain, however, that this will change in due time as awareness of the hazards of smoking increases in China.

As the business world shrinks, more westerners are Doing Business in China with greater success. An understanding of the importance of personal relationships and social interactions in Chinese business practices can clear up numerous misunderstandings between the East and the West, and bring about a prosperous future for all wishing to benefit from the rich business climate of this fertile and rapidly developing country.

[For more information about doing business in China, read Kevin Bucknall’s book Chinese Business Etiquette and Culture.]