HOW THEY OPERATE
“Knowing how to speak Chinese doesn't mean you know what to say in Chinese, but knowing what to say works in any language.”
Key Cultural Concept: 关系 Guānxì
Practical Definition: 关系 Guānxì is the relationship between two people that reflect their expectations from each other in terms of favoritism, referrals for connections, and the sharing of inside information.
BANANA is a common term American-born Chinese (ABCs) use to describe ourselves. It implies we are "yellow" on the outside but "white" inside. Still, there is nothing funny about the psycho-cultural implications Yellow Terror or Yellow Peril had during the 19th century when imperialism darkened the pages of history, and the Western world viewed East Asians as an existential danger.
Today, it simply means people like me likely share more cultural values with "Americans" even though we are ethnically Chinese. But how we are generally perceived in Mainland China further complicated my challenge to do business there until I developed a greater awareness of managing their perceptions to gain an advantage.
In 2018, I registered, "knowing how to speak Chinese doesn't mean you know what to say in Chinese,” but knowing what to say works in any language. And what you should say in China depends entirely on the level of Guanxi (关系 guānxi) between you and the other party. When I first arrived in Shenzhen via ferry from Hong Kong in 2004, I might as well have landed on a different planet. Though I could speak the alien language, nothing made sense. Merely speaking their language was ineffectual because everything operated on a different plane, Guanxi connections.
Guanxi is the level of relationship between two people that affects everything from trust, to favoritism, to referrals to get things done. It also affects the level of expectation between people, especially in terms of reciprocity and the sharing of connections. Guanxi is simple to interpret, difficult to comprehend, and impossibly complex to manage for most visitors.
Let's begin our journey by asking, what is the motivating factor when a Chinese person extends you goodwill or gives you Face (面子 miànzi)? How does it affect your level of Guanxi, and in what context does it matter?
GUANXI DEVELOPMENT PROGRESSION
We begin our story with Vincent, a random person I met at a bar in Shanghai in 2014 who would later become a 50-50 equity business partner. We started EME Career Consultants (Shanghai Meiyi Business Consulting Company, 上海美谊商务咨询有限公司), a training company located on the 9th floor of Shanghai Eco City in the heart of Jing'an district on Nanjing West Road, to serve the professional development needs of Chinese white-collar professionals seeking to accelerate their careers globally. So, was having close Guanxi relationships enough to guarantee a successful partnership in China?
Vincent was just under 40 years old when we met, white complexion, boyish face, and a little bit chubby. His face was round, and he always seemed to be smiling. And as far as Chinese faces go, Vincent has what I would consider a very trustworthy face if there were such a thing. Perhaps because he had a boy-like curiosity and personality to match, I felt I could trust him. In other words, I never detected any intentions from him to deceive me or to 占便宜 (zhànpiányí), which means to clandestinely extract small advantages whenever possible. Vincent always seemed to want to extend goodwill, whether it was buying drinks or volunteering inside information for connections or deals, known in Chinese as 内部消息 (nèibù xiāoxī).
I met Vincent while playing pool at the Blue Marlin Bar & Restaurant in Shanghai's New Pudong District, and we seemed to hit it off instantly. I was a much better pool player, and Vincent felt like a little brother who always looked up to me because I was older and better. Vincent's face would always animate with amazement whenever I made a difficult shot, like "WOW," which made me feel even more delighted during our games, even though they were just for fun.
During this time, I was importing American custom pool cues to China, both as a hobby and as a side hustle, and of course, Vincent immediately purchased one of my cues. He also seemed to be peddling them for me whenever he could, so our Guanxi quickly deepened.
Vincent and I became friends initially based on mutual interest, playing pool, and hanging out at Blue Marlin, but now he was technically also a customer of mine.
Now, I say that Vincent was curious because he always seemed interested in anything associated with my Americanness, business opportunities in the US, Western business strategy, culture, sports, you name it … basically, all the things that I consciously and subconsciously loved to talk about anyway. If this was a deliberate strategy, Vincent pulled it off brilliantly because he would just let me talk until I was fat and happy.
Vincent's wife was Grace, an average-looking Chinese gal without much personality. She spoke in a lower, monotone voice and didn't seem to laugh very much. Grace was about the same age as my wife, and she and Vincent had a son who was about three years old. As is typical with Chinese couples, Grace stopped working when she became pregnant, and her life had become mundane as a full-time mother. I would later discover that Vincent was always on the lookout for something that Grace could do, career-wise, but it also had to be something Grace would feel good about doing. In other words, it would have to be something that also gave her Face (面子 miànzi), which is the respect that she feels she gains when others perceive her as more than just a housewife.
There is an important distinction to note here. It's how Grace "feels" she is perceived within the context of Chinese perceptions and not how she is genuinely perceived, which is mainly irrelevant within a culture that prioritizes "giving Face" whenever possible.
As my wife and I developed an affection for their son, whom Grace would often bring to the bar, we also began having dinners together, and our Guanxi moved beyond Blue Marlin into each other's homes. Of course, these invitations were initiated by Vincent, but it felt normal and welcomed. So now, with our wives as friends too and visiting each other's homes, our Guanxi reached another level.
We next met his parents because they regularly traveled to Shanghai to help take care of their son. Then when my parents visited us in China, our families dined together at a formal restaurant. Vincent insisted on inviting us, so we agreed—partly to give him Face, but it also felt natural at the time to do so. And with our parents meeting each other, our Guanxi deepened to yet another level.
Vincent had another endearing characteristic, which was his ability to 干苦力活 (gàn kǔlì huó) or to 吃苦 (chīkǔ)—that is, to bear hardships. In practice, I observed that Vincent was always eager to do the heavy lifting, the manual labor that most white-collar professionals outsourced, even though he was a doctor himself in China. He wasn't a practicing physician, but he had a medical degree and worked at China's largest state-owned pharmaceutical company.
Vincent also had his “other” sources of income, or 灰收入 (huī shōurù), which is the "gray" income that most Chinese people have because they can extract it from the Chinese system or value chain. The net result was Grace technically didn't need to work for money. They already owned several properties, including their home, but Grace sought to continue her career for the sake of her Face, plus she was probably bored from staying at home.
As our Guanxi deepened, we spent more time together. Vincent liked to share with me his challenges at work and any potential business opportunities he encountered, leaving the door open should I ever want to partner with him. However, since my time was more valuable to me compared to how most Chinese people perceive time, I usually felt these business opportunities were too much work for too little return. So I would offer some ideas but never expressed any specific interest in participating.
As we started getting invited to their home more and more, it became routine that we'd chat about something related to business or strategy or just how I would solve a particular business challenge. And as we had more of these chats, which evolved into mentoring or advisory sessions, one common theme kept emerging: We should start a business together to teach and train Chinese people with my expertise.
So, was the level of Guanxi between Vincent and me sufficient to begin a partnership together? Yes, of course, it was, but what additional challenges remain when "trust" doesn't seem to be an issue anymore?
Guanxi can open doors and offer access to opportunities. It can also make partnering and working together more enjoyable, but having close Guanxi has its downsides too because it is a means, not an end.
Before continuing the story of my business partnership with Vincent, it is crucial to recognize that your level of Guanxi has ramifications with all stakeholders on the Chinese value chain, not just with your partner. Furthermore, there are vital differences between the Guanxi you have with those you hire versus those assigned to report directly to you because the very act of offering employment is interpreted as a gesture of goodwill. Whereas those already employed may feel a sense of entitlement, even from a lower-level position.
I encountered this precise situation when I inherited an established sales team in China. There was a stark contrast between the Guanxi I had with the local China sales manager, who began reporting directly to me upon my arrival, and the marketing assistant I personally interviewed and hired. The differences were subtle during our honeymoon periods, but the disparities rapidly intensified, as did the ramifications.
There are countless circumstances where Guanxi matters, but being a PARATROOPER MANAGER (空降部队 kōngjiàng bùduì) has special significance. China expat is the standard reference, but "Paratrooper Manager" metaphorically describes the newfound presence of a foreign leader in China and how they are perceived by those they will eventually lead.
When paratroopers are dropped onto foreign soil, they usually have secret intentions that cause disruption. In the case of China expats, although we come bearing gifts and opportunities, we are generally perceived negatively by local Chinese staff and coworkers across two broad categories.
1. We are unqualified, with the possible exception of scientists or technical fellows. Suppose you don't understand how things work in China, and you communicate through a translator. Continual honeymoon period treatment will distort your perceptions and create false expectations that often lead to disappointment. While everyone is secretly skeptical of your qualifications, you will be bombarded with repetitive Face-giving compliments and gestures.
2. We are a threat. Chinese people always figure out how to navigate an existing system or process to extract the maximum personal benefit (利益 Lìyì – Chapter 2). So when you suddenly appear with intentions to improve, add, or change something, it would never be perceived as a "personal" benefit by those already thriving in the current system, even if they were the loudest in demanding change. Initially, they will perceive you as a threat to their influence, but this can become an opportunity for those who understand Chinese psychology.
My paratrooper manager experience began in 2011 when I was hired from the US to lead the entire Asia Pacific sales organization. During the final interview with the corporate CEO from Germany for a high-profile key account management position in the US, most of my answers drew on experiences in Greater China. The recruiter advised me not to emphasize my “Asia experience” for this primarily domestic position, but it was difficult to decouple the two. Dr. Schmidt must have been hit with an epiphany, as I seemingly answered a plea from across the ocean because I was soon in Germany meeting corporate executives, touring their main factory, and shaking hands with members of the supervisory board. A few weeks later, I was preparing to relocate permanently to Shanghai for a newly created position.
Asia Pacific (APAC), represented just 6% of global sales, vastly disproportionate to its market size. Our company faced a real dilemma in selecting someone to lead this regional sales growth. If they sent someone from Europe to Asia, that person would have no idea how to change things except to listen to the recommendations of the local salespeople already there. If they elevated the sales manager in China, he wouldn't be accepted by the guy in Japan, and vice versa if they decided to promote the Japanese sales manager who also handled the Korean market. Robert and Richard, whom you'll meet later, both joined the organization around the same time and were of equal seniority.
Our conservative German leaders were quite sensitive to any personal slights that may cause a loss of Face. And I would later learn they hired an external consultancy to indirectly inform Kai, one of my future direct reports, that he wasn't qualified for the position I would eventually hold. Kai managed Southeast Asia from Switzerland, a tall, good-looking German who'd joined the company just after high school and handled all the sales orders coming from Asia, so he was younger and lacked leadership experience. Along with Richard and Robert, the three became my core sales leadership team during my tenure as sales director of the region.
I first met Richard, my highest-level direct report in China, when he personally picked me up at Shanghai Pudong International Airport. Richard is an average-looking Chinese man about the same height as me. I'm 5-foot-9. Richard was a little stocky with neatly parted short black hair and a squarish face. He wore a white dress shirt, dark slacks, and black dress shoes that were slightly worn. There was no way I could have picked him out of the crowd if he wasn't holding a company sign with my name amongst the sea of prearranged drivers there to pick up their passengers just outside of customs.
Richard was our China sales manager and the first local salesperson hired just over a decade ago when our company first established its presence in China. And over those ten years, he carved out a pretty good situation for himself, because no one Richard reported to or worked with from Germany spoke Chinese or understood anything about how China works. Richard essentially had carte blanche as long as he managed the perceptions of the real decision-makers, which is relatively easy for someone conditioned from an early age to give Face and lip service.
Kai had a particular affinity for Asia because his girlfriend was Vietnamese, so he was constantly looking for an opportunity to work somewhere in Asia. Richard, Kai, and Robert, the sales and general manager in Japan (because Japan has a warehouse and sales office), joined this company around the same time ten years earlier. Essentially, they were equals who worked independently with little supervision in their territories, which created a dilemma when our company decided to prioritize the region. But with zero warning or prior consultation, how would Richard perceive my arrival in China as his new boss?
MY CHINESE HONEYMOON PERIOD
How did Richard embrace my presence in China given that I am not German and had zero industry experience, company connections (Guanxi from his perspective), and relevant technical expertise? Furthermore, how might I disrupt the sales arrangements he'd created over the past decade?
Before my insertion within the China sales organization, Richard made all the arrangements for joint sales calls with visiting product managers and key account managers from overseas. More specifically, he would orchestrate every visit to leave impressions that were most favorable to him. He was the translator, interpreter, and advisor for every meeting in China, including internal ones. In other words, Richard was 100% in control of the narratives coming out of China.
Now let's add some more context to this situation from Richard's point of view. I was hired without anyone consulting him or anyone else in China. My only measurable qualification was my fluency in Chinese and prior experience dealing with all sorts of crazy situations in China. I wouldn't need an interpreter, and I understood how things worked in China, so in essence, I could potentially become a dissenting voice from China. And at the minimum, I would offer another perspective that would severely limit his ability to control the narratives.
Now, let's consider this question again. Is my presence something that Richard welcomes and embraces, or are there things he fears from my "American" mentality and system of values that might challenge his current way of working?
My relationship with Vincent is an example of how Guanxi deepens between two people who, by default, don't have any hierarchical relationship. In Chinese, we say 没有利益关系 (méiyǒu lìyì guānxì), which means we do not currently share any mutually beneficial connections. But nothing exists in a vacuum, and in the next chapter, WHAT THEY CONSIDER: Liyi (利益 Lìyì), we will add oxygen to your understanding and application of Guanxi.
In contrast with Vincent, Richard was my direct report and became so before we'd ever even met. So, we can use this dynamic to illustrate what's happening beyond perceptions through various Guanxi development scenarios to highlight subtle signs that everything isn't always as it appears, especially when you are in a reality distortion bubble called the Chinese honeymoon period.
They say language is the gateway into another culture, but Guanxi is how you gain access to everything you desire in China.
Guanxi is the level of relationship between two people that affects everything from trust, to favoritism, to referrals to get things done. It also affects the level of expectation between people, especially in terms of reciprocity and the sharing of connections.
Guanxi is simple to interpret, difficult to comprehend, and impossibly complex to manage for most, as understanding it begins with the Chinese consideration of 利益 Lìyì and deepens with the Chinese culture of GIVING FACE (给面子 Gěimiànzi).
1 // Recall “values instilled” by your parents, older relatives, and society at large. What was your primary aspiration? Growing up in the US in the 80s and 90s, “be all you can be” was my North Star. Today, I may want my children to find “greater purpose” by serving others, as my purpose has evolved too. What’s your North Star?
2 // Imagine the North Stars of Richard and Vincent. What fundamental differences might exist?
3 // How essential was our Guanxi relationship for Richard? Vincent?
4 // What was most affected by our level of Guanxi for Richard? Vincent?
5 // What are the PROS and CONS of deepening our Guanxi for Richard? Vincent?