If you are considering doing business in China, you probably know that there are fundamental differences to consider, compared to the Western world. Being aware of these differences and working within the system will allow you to make the most of your opportunity, rather than just trying to do it the same way and going against the culture. As soon as you start doing business in China, you will become aware of “Guanxi” (relationships), if you are not already familiar with this concept. But what you may not know is that there is a right way and a wrong way to work within this framework, and the faster you can adapt, the better your chances of success.

Guanxi and Xinren

Where Guanxi is the foundation of relationships, which are based on your cultivated relationships or acquired relationships, Xinren is the foundation of trust. This is a fundamental business principle that is the same around the world, trust is what makes business relationships, but the difference lies in how Chinese business culture generates this trust. All trust in business relationships in China is based on personal relationships. Therefore, developing your Xinren, or business confidence, depends on your ability to connect outside of the boardroom and meet the man behind the business.

The main logic behind this thinking is that Chinese entrepreneurs do not trust the legal system. Because of this, they are less likely to take a chance on the trust they provide and should ensure that you develop a proper personal relationship first. The legal system is simply too inadequate for the pace of innovation and business development and therefore most Chinese entrepreneurs avoid all these legal hassles and only deal with companies after developing Xinren.

There are 5 main reasons why, in China, it may take a little longer to develop trust, which must be earned and is not freely given.

Broken Legal System: The amount of time your legal system has had to try to adjust to the sudden explosion in business makes it difficult to pass new laws quickly enough.

Chinese Culture: Abrupt changes in government and wartime attitude maintenance shape the outcome of most negotiations before they start. They can frame these interactions as combat, and instead of working together to find the best benefit for each side, they defend their position.

Bureaucracy and Corruption: The structure of government, in which officials are loyal to their superiors above anything else, leads to corruption when one of the superiors sees an opportunity.

Materialism: With the Chinese beginning to covet money in the same way that the Western world has for the past century, the values ​​of honesty and business integrity may not be as ingrained.

However, there are a few things you can do to increase your chances of connecting with your Chinese counterparts, making it easier for you to do business.

Contracts – Be sure to use a contract. You can get caught up in the confusion of personal and business lines and think that just because the legal system is not optimal, you don’t need it, but you need it, and you need more than just a contract.

Connect with the Right People – Every business is made up of a group of people, so take the time to connect on a personal level, especially outside of the business environment, to develop long-lasting, trusting relationships.

Use a process – Make sure you have a process that outlines expectations so that you can avoid misinterpretations based on unfair business practices. Put all the rules on the table so that anyone in your organization or that of your Chinese partner clearly adheres to these rules; or not.