When McDonald's primarily entered china, it was self-assured that its success in other parts of the world facilitate its success in china, however they quickly found out that the relationships oblique by guanxi are an essential to business success in china. McDonald's lost a good-looking store location near Tiananmen Square to a Hong Kong developer who, obligations to relationships and connections developed over the years was able to encourage city officials to overlook the lease McDonald's help for property.

Describe the concept of gaunxi. Why is it so significant to businesses operating in china? How did McDonald's lack of guanxi increase its cost of doing business in china?