Why is it so common to give gifts while doing business in China?

The Chinese tradition of gift giving stems from the culture of relationship building. Business travelers are advised that the best time to give a gift is upon initially meeting someone "because it shows a relationship of friendship is being established, commemorated by the gift." Business transactions in China are born from these relationships and connections, which in Chinese are called guanxi. Guanxi has been characterized in this way: "Such connections are the single most important factor for success in China today. Without guanxi, it doesn't matter how intelligent or talented you are or how wealthy, you won't get ahead. People with better connections can block you at every move . . . ."

To build guanxi, Chinese exchange gifts and favors. Once a gift is given or a favor done, the recipient has the obligation to reciprocate in the future-the mutual obligation created is the basis for the guanxi. When a gift is given or favor done to reciprocate, the reciprocation is often greater than the original gift or favor. This allows the mutual obligation to continue on, as the original gift giver or favor doer is now obliged to reciprocate.

These informal relationships and connections are deeply rooted in Chinese tradition. Historically, Chinese commerce was "largely unregulated by formal law and was intensely relational." Chinese "generally conducted business with counterparts they knew personally or with whom they came into contact through mutual acquaintances or relatives."130 These informal relationships and connections substituted for a more formal legal system of rules and enforcement mechanisms.

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