Greg Bissky describes the inter-workings of the guanxi dynamic in the below videos from Youtube.com. The title of Mr. Bissky's book, Wearing Chinese Glasses: How (Not) to Go Broke in Chinese Asia, gives an accurate description of the attitude one must have going into business ventures in China. The western lenses through which Americans and Europeans use to view the Chinese culture create a significant blind spot making it much more likely to "go broke".
The second clip emphasizes the point of "Why Westerners Don't Get It". Again, Bissky discusses the need for Westerners to open their minds to a different way of thought. McGregor cites this point: "China is ruled by its deeply ingrained culture more than anything else." There are obviously multiple "right" ways to approach and succeed with a business or any other endeavor. The key to success in China is approaching it in the Chinese way. This is due to innate belief among the Chinese of their superiority. How can a civilization survive with the same general culture, institutions, beliefs, etc. if it is not the so-called "right" way? The notion of cultural superiority and survival was, however, shaken in the 19th and 20th centuries with the Opium Wars and resulting semi-colonization. Communism was embraced in large part due to the CCP's ability to force out the "barbarians". McGregor's quote "The humiliation visited on the Chinese are fresh in their memory, but so is the superiority complex...Thus you will find yourself facing the yin and yang of Chinese suspicion and arrogance" describes the exact paradox businesses face.
Consequently, Westerners must learn to work the "Chinese right way". As the economies of the developed world become unable to further generate growth, it will become imperative to adjust the Western superiority complex and learn to work wearing different glasses. Otherwise, access to world's largest market will be curtailed making it impossible to continue the economic growth and prosperity the world has enjoyed for the past 50 years.
One of the central tenets of Chinese society is its notion of how to maintain social order. Unlike the US, China is a shame based society not a guilt based society. The concept of "saving face" is paramount in all relationships which ties hand in hand with guanxi. Maintaining harmony is the key to all interactions both within and without a person. During my study abroad in China, one of the most fascinating ideas I encountered was how a Chinese person wakes in the morning--strange to compare with a business interaction but appropriate. Instead of getting up, making coffee, showering, and going to work as many Americans do, a Chinese will wake and then do a meditation of sorts to ensure/check that all of the parts of the body are working together in harmony. A mental appraisal of sorts is completed to make certain everything mentally and physically is working in conjunction. This is how all facets of the life are approached. Harmony, the yin and yang, must always be kept in balance. Consequently, external relationships are addressed in the same fashion. It is crucial that discord be kept at bay in order for all parties to maintain face.
Part of keeping face is keeping promises, both verbalized and not. Unfortunately, for the unaware Westerner, promises are inadvertently made and then broken. With guanxi, upon entering the relationship, you not only become obligated to your partner but also to your partner's friend's friend. Mia Doucet further expounds upon this concept of trust and guanxi in her article, Building Trust, and echoes McGregor's statement "...friendship in China carries heavy obligation." Being unaware of this string of obligations can undo what would have been an otherwise successful business marriage. Chinese are also guilty of technically breaking promises through the manipulation of contracts. Bissky describes this notion with the Chinese notion of the future--man may propose things but the gods decide what happen. Therefore, the future is fluid and a contract becomes a hope of what will happen rather than what will happen as circumstances change.
Building Trust goes on to describe the necessary steps to prevent the common mishaps associated with working with the Chinese and intellectual property. Not only does she cover the same issues of earning and re-earning trust again and again to establish a true guanxi, but she also discusses the fundamental differences the Chinese have about ideas which leads into the next discussion, The Joint Venture Paradox.