Failure to Launch in China - The "Guanxi" Dilema

A Lack of Guanxi is one of the Biggest Reasons Canadian Companies Fail in China

Richway Tech, a digital marketing firm in Vancouver, Canada, estimates that almost 50% of foreign businesses fail in China. There is a long list of heavyweights who have fallen: Home Depot, Google, Amazon, etc. One of the biggest reasons companies fail in China is because they don’t understand the importance of “Guanxi”. Guanxi is a kind of cultural shorthand in China that concerns the language, networking, and connections required to get business deals done. When expanding into China, western companies build teams based on CV’s rather than the often-unseen Guanxi influence of potential employees.

“It’s not really so much that the concept of Guanxi is too difficult to understand,” says Kevin Li, Project Manager at Richway Tech. “It’s more that it’s so often overlooked that is the problem.” Companies looking to sell into China should invest some time into figuring out whether or not Guanxi will be an issue for them. With the new e-commerce and trade platforms emerging, a lot of the guess work is being taken out of the process.

Whether or not you need to worry about Guanxi really depends on the scale of your business. A company that is selling a few products to a market niche in China could most likely make a few trade partners and logistics partners and be fine without much thought given. However, a big company looking to set up offices, stores and set up their own logistics network would be in trouble if they overlooked the Guanxi concept.

The importance of Guanxi will be discussed in detail at the upcoming Canada China Trade Conference in Vancouver, Canada. This event also offers networking opportunities with several huge e-commerce platforms like Alibaba and JD.com. The CCTC is taking place on August 23rd of this year at the Vancouver Convention Centre with talks starting at 9:00AM. The event presents an opportunity for Canadian businesses to network with Chinese e-commerce companies as well as learn digital marketing strategies from the people who built China’s Internet from the ground up. Tickets start at $300.