How do Chinese buyers evaluate their guanxi with French suppliers?

Chinese Vice Premier Ma Kai met with French Minister of Finance Michel Sapin in Paris in 2016 and the two agreed to deepen ties between the two countries. So how is their guanxi? CNNTV

Along with the rapid economic development of China in recent years, a growing number of Chinese firms invest internationally to develop sales and acquire new assets. According to a Ministry of Commerce report, by the end of 2015 China’s foreign-direct investment in France has reached 5.7 billion US dollars.

With a growing number of Chinese enterprises investing in France, however, problems concerning buyer-supplier relationships have also arisen. One of the most significant are the cultural differences between Chinese buyers and French suppliers. Chinese culture heavily influences how business is conducted and the two parties communicate. For Chinese people, they pay much attention on interpersonal relationship and rely on this to solve daily and commercial problems, which is called the guanxi culture.

“Go through the gate and get a connection”

The Chinese term guanxi contains two characters: Guan (关) and Xi (系). Guan (关) means a “gate or barrier,” and Xi (系) means “connection or link.” So guanxi literally means to “go through the gate and get a connection”. Guanxi could be simply translated as “interpersonal relationship”. In recent management publications, it has been more accurately defined as a reciprocal and emotional relationship that based on exchanging favours between partners. The favor we exchange in guanxi is called renqing. Unlike in western contexts, where favours mainly refer to specific things such as money, goods or services, renqing can also include some abstracts such as opportunity, affectional care, and so on. When someone does you a favor, you will owe him or her renqing. And it’s your obligation to return this renqing when necessary. If you are fail to return it when your guanxi partners need, you will lose not only your mianzi (face, your social reputation), but also your xinyong (your personal credit), which will lead the end of your guanxi relationship.

Moreover, since renqing is not expected to be returned immediately and cannot be calculated precisely, the exchanging of renqing in guanxi relationship is an endless process. Therefore, it’s recommended to return more renqing than you are owned so as to maintain a good and long-term guanxi relationship. In China, we believe that “the favor of a drop of water has been rewarded with the gratitude of a fountain of water”. In today’s business world, people establish guanxi with others for economic interests (including investments, rare resources, etc.) or for adressing commercial problems. Because guanxi mainly refers to interpersonal relationship, the B2B guanxi is established between each company representatives who communicate frequently with each other. It’s believed that a closer guanxi between two companies’ representatives can lead more collaborative behaviours through frequent guanxi interactions and renqing exchanges.

Nevertheless, in a business network, companies of different culture background could influence others, and also be influenced by others at the same time. Regarding Chinese companies in France, their way to practice guanxi could also be influenced by their French suppliers. Hence, we should pay attention that the Chinese in France may perceive guanxi differently from the traditional Chinese local guanxi.

Personal connections and ethics

The Sino-Franco guanxi contains two parts: affection and business ethics. Since guanxi can have positive effects on business performance, French suppliers should pay attention to the “affection” and “business ethics” so as to increase the quality of their guanxi with Chinese business partners. Firstly, affection means family-like attachment, or friendship. In Western countries, business partners’ friendship is always followed by a successful business cooperation. In contrast, the Chinese prefer to make friends before starting business.

So for French suppliers, it’s best to regard your Chinese partner as a friend – in China, people like to mix work and private lives. For example, a personal favour can be returned through beneficial commercial terms. Hence, personal interactions between company representatives should include dining, the exchange of gifts and private visits. It’s believed that through these social interactions, business partners’ affection will be increased, which in turn develop their guanxi.

Secondly, business ethics should include both personal credit and a harmonious relationship. Personal credit, xinyong, is the trust based on personal quality (like reliability and integrity) rather than written contracts. In other words, a Chinese partner chooses you for business cooperation not just because of your brand reputation, but also because you are trustworthy. Your credit also depends on your attitude towards them as well as others such as employees, friends or even restaurant waiters.

Presentation of the 2017 edition of the China France Investment Dialogue, which took place on 11 July in Paris.

Because Chinese culture is dominated by the Confucianism, harmony is regarded as being fundamental. When negotiating with Chinese counterparts, French suppliers should work to smoothly achieve their goals. This means using rewards, recommendations, and exchanging information. Besides, the use of coercive power such as threats and legal action should be strictly avoided because they can lead to the guanxi partners perceving conflicts.

In conclusion, because guanxi culture heavily influences business behaviour, French businessmen and women should work to build close guanxi relationships with their Chinese partners.