By Frederik Balfour Guanxi. It's the first word any businessperson learns upon arriving in China. Loosely translated, guanxi means "connections" and, as any China veteran will tell you, it is the key to everything: securing a business license, landing a distribution deal, even finding that coveted colonial villa in Shanghai. Fortunes have been made and lost based on whether the seeker has good or bad guanxi, and in most cases a positive outcome has meant knowing the right government official, a relationship nurtured over epic banquets and gallons of XO brandy. Now, like so many things in China, the old notion of guanxi is starting to make room for the new. Businesspeople—local and foreign—are tapping into emerging networks that revolve around shared work experiences or taking business classes together. Networking that once happened in private rooms at chichi restaurants now goes on in plain view—at wine-tastings for the nouveau riche, say, or at Davos-style confabs such as the annual China Entrepreneurs Forum held annually at China's Yabuli ski resort. By tapping into these informal groups, Western companies can theoretically improve their understanding of the marketplace, hire the best talent, and find potential business partners.Guanxi goes back thousands of years and is based on traditional values of loyalty, accountability, and obligation—the notion that if somebody does you a favor, you will be expected to repay it one day. One of Asia's most successful businessmen, Hong Kong billionaire Li Ka-shing, has parlayed his guanxi particularly astutely over the years, in the process winning valuable licenses and permission to build huge real estate developments. Playing the guanxi game is still imperative, and especially for foreign investors. Knowing that Party boss (or his children) remains not just a competitive advantage but an admission ticket.
As China increasingly meshes its economy with the rest of the world, its ascendant professional and...
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