How to maintain success in China via "Guanxi Engine"

Every interaction in China can either improve a relationship or activate a cloak of deception called goodwill extraction. While this might sound dramatic, it simply contrasts the possible outcomes of every engagement you'll encounter doing business in China.

Once you understand your interactions in the proper cultural context, you will no longer be surprised by any response or development.

In hindsight, it was entirely predictable when a trusted local partner in Nanjing began lying, cheating, and stealing from our company.

When a deficit of goodwill reaches a tipping point, it is natural in Chinese psychology to seek substitutes in other parts of the local value chain.

Westerners call it corruption, but in Chinese culture, this behavior is justified and socially acceptable. This book will refer to any "bad" behavior as goodwill extraction because when your Guanxi engine isn't properly maintained and running smoothly, even good relationships will veer off course, and avoiding a fatal crash should be the priority of anyone competing inside the Chinese arena.

The' Chinese arena' is an apt term for any business scenario involving participants from mainland China. It's a space where emotional and psychological stresses dominate, and values and ideologies often clash. However, it's also an area where accepting alternative paradigms is paramount. When we approach learning new tactics for a 'game' on a new field of play, tradeoffs feel less personal, and withdrawing ethical and moral considerations becomes more acceptable.

Moreover, when we view our experiences in China as a game dominated by psychological warfare, like poker, curiosity replaces judgment.

We can craft a new persona conditioned to win the China game inside the Chinese arena. Instead of studying ancient strategies, we will extrapolate Art of War tactics that Chinese people utilize subconsciously based on common behavior patterns to develop winning tactics that work in the new normal of post-COVID China.

What are emotional and psychological landmines?

If you've ever been in a heated argument that escalated from something trivial, you've detonated a psychological landmine. Anecdotally, Chinese people are perceived as more emotional compared to their Western counterparts, particularly in terms of jealousy, spitefulness, and portraying a vindictive mentality. Again, my observation isn't a criticism but rather a comparative outcome based on social priorities that differ between cultures and contrasting the things that matter between a Face-centered society and a happiness-oriented one.

Our challenge lies in the fact that Chinese emotions are usually hidden, making it difficult to determine or predict anything based on their reactions.

We often say that Chinese people have double standards and enjoy comparing their status to others for the sake of Face. In Chinese culture, achievements on their own merits aren't psychologically valued as much as when compared to advancement over someone else, followed by praise and acknowledgment from a close Guanxi connection. For leaders in China, promotion decisions are a delicate undertaking because overlooked candidates often require consolation (安慰 ānwèi) and persuasion (劝 quàn) from a close connection to accept reality. Otherwise, the perceived loss of Face could lead to resignation or clandestine dereliction of duties.

This reactive social psychology highlights the need to understand how Chinese people feel and the ramifications of dismissing them.

What is the Guanxi engine?

Like any business venture, complex systems have many moving parts and operate most efficiently when properly maintained and calibrated. The best metaphor for explaining this is to imagine a proverbial 'Guanxi' engine that powers everything related to your endeavors in China. Many complexities in navigating the Chinese arena are psychological, but all practical outcomes revolve around the Chinese definition of relationships, a.k.a. Guanxi (关系 Guānxì).

While most Westerners know this term, few fully grasp its significance or condone its biases.

Suppose nepotism and other forms of favoritism are acceptable practices; we should still expect a constant barrage of ethical dilemmas and emotional irritations to impede progress toward any intended destinations. Simply put, your frustration is your Achilles.

Learn more about my upcoming book , Strategic Pragmatism for De-Risking Post-Covid China: Circumnavigating Cultural and Psychological Landmines Inside the Chinese Arena, on my new author page .