Now that we’ve covered the update on the FCPA and corruption in China and you know that the wrong gift could have legal repercussions, let’s talk about Guanxi and how gift giving can help or hurt your business strategy in China.
Guanxi – Your Personal Business Network
Guanxi broadly defined is your business network; however, this network is much more important and has stricter rules than in the United States. Remember that in China, all business is personal. The line between a professional and personal relationship is blurred in Chinese culture. They are simply relationships.
Andrew Hubert, in his book “Guanxi for the Busy American,” describes Guanxi as a favor network. In its truest form, Guanxi is not corruption but rather a cooperative effort to make business and life work. Harmony plays an important role in Chinese culture. Everyone must work together and play fair. Managing relationships so that there is harmony between all parties is important.
Chinese people are very careful about favors and gifts. They don’t want to be in your debt at the wrong time. At one point, Chinese people carried around notebooks to track favors and be sure that every favor was repaid appropriately. A key point in Hubert’s book is managing the favors you owe before you are forced to return the favor in a manner not to your benefit. You would be smart to manage your own debts and favors carefully when in China. The alternative is to refuse to repay a favor, which will end the relationship.
Don’t Give the Wrong Gift
In the United States, we say, “It’s the thought that counts” when someone gives us the wrong gift. We appreciate that they took the time to go out and get a gift. In China, the thought counts less than your judgement. It certainly does not cover up a mistake. You might be okay if you simply give a mediocre gift, but it will be serious if you insult someone.
Each culture has rules about giving gifts. Chinese culture is specific about numbers, colors, certain gifts (often related to how the words sound.)
It is Your Judgement as Much as the Gift
Any gift you give should be the right value. The right value respects the state of the relationship and your relative social standing. You must display good judgement in this and many other areas to be successful in doing business in China.
A gift that is too expensive creates an obligation for the person receiving it. They will not want to be in your debt and will go out and buy a gift of similar or better quality. If this continues to happen, they may resent the obligation and begin to avoid you. A gift that is too cheap for the relationship or their social status will cause both of you to lose face. They will lose face because you disrespected them. Make a mistake in either direction and you will likely lose face for poor judgement.