Guanxi - Relationships are more important than rules. “Guanxi” describes the astonishingly complex and nuanced network of personal relationships that every Chinese person maintains. Guanxi is pervasive and all-encompassing. In many ways, guanxi is both overhyped and underappreciated by Westerners who talk about China. Guanxi isn’t the only force in Chinese culture and it’s not a magic potion that makes all things possible. It is, however, ubiquitous and unrelenting. It’s a bit like gravity. Gravity doesn’t mean that planes always have to stay on the ground, but it does mean that’s where they’ll end up. Rather than rules, guanxi is mostly what guides people’s behavior in China. For Chinese people, rules aren’t irrelevant, they’re simply not as important as personal relationships. Guanxi tends to be central to issues surrounding loyalty and trust.
Hierarchy - All relationships are hierarchical and, thus, unequal. “Hierarchy” is concerned with people’s relative position and authority within the group. Hierarchy mostly describes the way individuals interact with people who have some kind of power over them (like a boss) or control something the individual wants (like investment or a purchase order). The notion that people are NOT equal is central to the way the Chinese see the world. Hierarchy is usually the driving force behind problems with the way individuals interact with people above them.
Face - Face (perception) is more important than facts (reality). “Face” is a combination of a person’s dignity and prestige, and the way they’re perceived by the rest of the world. The concept of face is similar to Lee Atwater’s axiom that “Perception is reality.” For Chinese people, the way things look is just as important as the way they actually are. Face is the driving force behind most problems with communication and appearances.
Feudalism - Leadership equals lordship. “Feudalism” is the mirror of hierarchy – it describes the way individuals interact with people over whom they have some power (like employees) or who want something from them (like vendors). The phrase that encapsulates feudalism is “leadership equals lordship,” which means that the person in charge has the ability and willingness to exert control, almost a kind of ownership, over the people who answer to them. Feudalism is most often associated with perceptions of unfair treatment.
The Small Eight
In addition to the four major elements, there are eight minor cultural elements and facts of life that impact most business relationships. These elements are most often secondary parts of the explanation as to why the Chinese do things in a particular way, but they’re nonetheless important.
Group Orientation - The group is more important than the individual. “Group orientation” refers to the fact that the Chinese are much more collective, and place much more importance on the group as a whole, than most European and North American cultures.
Long Term Orientation - The long term is what’s most important. “Long termism” is related to the longer view Chinese have about time, as compared to Western societies. For example, the Chinese government publishes Five Year Plans, whereas most governments in the West work on annual budgets.
Incremental Improvement - Step-by-step improvement is better than revolutionary change. “Incremental improvement” describes the preference Chinese people have for step-by-step changes, rather than radical departures from previous ways of working. “Revolutionary” or “radical” improvements are seen as dangerous and undesirable.
Pragmatism - Don’t let perfect be the enemy of good enough. “Pragmatism” refers to the fact that Chinese businesspeople focus on what can be accomplished quickly and easily, instead of waiting for a perfect solution that may never come. To many Westerners, this can make their Chinese counterparts seem shortsighted and unconcerned with quality.
Harmony - Things are better when everyone gets along. “Harmony” is the Chinese quality of placing a premium on the fact that the group itself runs smoothly and that different groups get along with each other. For Chinese people, harmony also has a strong and positive association with stability.
People (China’s huge population) - China has a HUGE number of people in it.“People” is shorthand for China’s huge population, its massive labor pool, and the fact that it’s easy for individuals to hide within the larger group (due to the small number of last names and the fact that so many people have moved for work reasons).
The Cultural Revolution - The Cultural Revolution had a massive impact on society. “Cultural Revolution” refers to the enduring impacts that the Cultural Revolution has had on Chinese society. This is shorthand for the Chinese distrust of people they don’t know, their lack of faith in the rule of law, and their obsession with personal loyalty. It’s an expression of the negative side of guanxi, because it emphasizes what happens in the absence of strong relationships.
China’s Rapidly Changing Environment - Stuff in China is constantly changing. “Rapidly Changing Environment” encapsulates the way things in China are changing more quickly than they are in most Western countries. This encompasses the economic, cultural and physical changes that have occurred, and continue to occur, as China develops. People who haven’t been to China tend to discount the significance of ongoing changes there– after all, change isn’t unique to China. Which is true. What IS unique, however, is the pace and scale. For example, hundreds of millions of China’s urban middle-class citizens were penniless rural farmers 30 years ago. It took the US and Europe almost a hundred years to make that same change.