Building up your ‘guanxi’ account in China

Source: The Edge Singapore

By Daryl Guppy

Updated: 2025-09-25 21:22

In China, guanxi relationships will help you to identify the best service provider and the most appropriate person to speak to / Photo: Bloomberg

The Chinese term “guanxi” is either simple, or remarkably complex. For many Westerners aspiring to work in China, guanxi is a simple concept broadly defining relationships.

For those Westerners working in China, guanxi is a complex web of relationships.

Guanxi is both a currency and a banking system. Survival in China without this banking system is very difficult. Guanxi at one level is about relationship power and Westerners are quickly and erroneously side-tracked into Lord Acton’s dictums about power and corruption. However, guanxi is not about corruption and those who equate guanxi with corruption just reveal their ignorance of the concept and its complexity.

Consider Western taxation law and regulation which is an ever-changing landscape. We navigate it by employing lawyers, accountants, advisors and advisory services. We generally buy these skills, although the level of service we get may vary depending upon our relationship with the principals of the firm. The larger customer gets more services than the small customer.

In China, guanxi relationships will help you to identify the best service provider and the most appropriate person to speak to. Rather than pay for it via the anonymity of an unknown third-party service provider, many Chinese will spend guanxi capital to access the same information.

My elderly mother lives in a city far away and experienced a rapid deterioration in health. She was admitted to hospital, but was treated badly, shuffled from one bureaucratic pillar to another. I felt helpless in my attempts to understand the situation and improve the outcome. In comparison, my sister is a nurse in another city, so she talked to the nurses and the doctors in a way that I cannot. She speaks their language, understands their processes and was able to facilitate better and more appropriate treatment for our mother simply because she knew what she was talking about. They listened to her, and, instead of taking the usual eight weeks, the problem of care was resolved within three weeks.

This is family guanxi in operation. If you replace “my sister” with “my friend” in my story, you will have a better idea of how Chinese guanxi operates.

The Chinese open their guanxi accounts from the day they are born. In part, it is gifted to them by their parents but they must add to this account through their own actions.

Westerners do not have this advantage. As a Westerner, you open a guanxi account by making a deposit. This may come through helping someone with kindness and offering support in a time of need. It comes from being a good person, a moral person, a caring person. It comes from offering assistance before it is requested.

We might call this a reserve of goodwill. You have a guanxi account with every significant individual you meet or with whom you want to do business.

Deposits may be made into your guanxi account or someone may open an account for you. The chairman of another company may ask you to take on his son as an intern and so he makes a deposit or opens a guanxi account with you.

These are the Chinese requests for favours we are familiar with, but often we are less familiar with the long-term purpose of these. They are deposits into a guanxi account that you can draw upon in the future. Just as with any bank account, the funds can be used for honest and ethical purposes, or for corrupt purposes. The use you put the account to is your decision. Choose wisely.

Deposits are large and small, accumulated from small favours and considerate actions and amassed to form significant deposits.

I arranged for white flowers for the funeral of a friend’s father who was buried in his home village. This international gift gave unexpected “face” to my friend and unintentionally became a large deposit in my guanxi account. These accounts accumulate a growing balance and your Chinese friends keep an accurate accounting. It is done as intuitively and as automatically as Western drinking friends keep track of whose turn it is to buy the next round of drinks no matter how drunk they get.

Not all relationships are created equal and the strength of obligation bonds varies, like ripples expanding from a stone thrown into a pool. The closest and most powerful bonds are between family members. Next strongest are the bonds created by shared high school and particularly university experiences. Beyond this are relationships created at work and with colleagues.

Not quite at the furthest reaches of these relationship ripples are those with Western businesses. Over time as relationships deepen and mature you may move more towards the inner circles but you will rarely gain access to the very innermost.

Westerners do not have many guanxi coins to start with. It takes time to build a bank account. Many Westerners often complain that the first few years in China are a constant situation of constant giving and getting little in return. This giving is the foundation of building the guanxi bank account. Your Chinese colleagues have a lifetime of savings, but you are starting out afresh so it takes time to save.

Guanxi purchased with dollars is as counterfeit as a Shenzhen DVD of the latest movie. It will not stand the tests of time, financial stress or bankruptcy. It reflects a shallow and simplistic Western understanding of a complex system based on respect, obligation and responsibility.

Daryl Guppy is an international financial technical analysis expert. He has provided weekly Shanghai Index analysis for mainland Chinese media for two decades. Guppy appears regularly on CNBC Asia and is known as “The Chart Man”. He is a former national board member of the Australia-China Business Council. The writer owns China stock and index ETFs