This research investigated the process of guanxi development in business partnerships between art dealers and artists in the Beijing art industry. The characteristics of guanxi were identified at each stage of the relationships’ development. They were then examined to identify which factors were the most influential. Finally, their effects on the business relationship were examined. Qualitative data was collected through in-depth interviews over two years in three of Beijing’s art districts. The transcribed and translated interviews were analysed using a grounded theory approach. This process was aided by qualitative software which enabled comparisons to be made between participants allowing theory to emerge. It was found that there were two markets in the art industry, one based on the giving of gifts to gain favours and the second on private market forces. The former, the painting gift culture, was found to be corrupt and often connected to bribing government officials. Within this environment galleries used guanxi networks to locate new supply and artists used them to locate art dealers. This reduced cost in time and money but did not always provide a competitive advantage if the product did not suit the market. Previous research has focussed primarily on the outcomes of guanxi as opposed to its development. To initiate business guanxi an intermediary was not necessary although it did facilitate the process. Of the three methods used to build guanxi, banqueting, gift giving and favours, it was found that banquets were most important at the first and second stages to initiate guanxi and build ganqing as the relationship evolved. It also played an important role in creating affective trust before cooperation began. Gift giving also increased ganqing at the second stage. Favours were most important after guanxi had consolidated and also contributed to an increase in ganqing. Having good guanxi did not lead to cognitive trust, but it was needed for cognitive trust to develop. This paradox led to formulating the Guanxi-Trust Model of Business Partnerships. Due to a disposition to distrust ganqing was developed which led to affective trust in order to kick start the relationship. The decision to cooperate was based on ability, perceived risks and mutual benefits. As cognitive trust developed it was compartmentalised into ability, moral character and mutual benefit which determined the willingness to cooperate. Throughout the process guanxi contributed to affective trust whereas successful cooperation led to cognitive. Cognitive trust also increased ganqing which improved the pair’s guanxi. Galleries that implemented the Guanxi-Trust Model were able to lock artists into long-term relationships due to successful cooperation and ganqing. The artists remained loyal to the galleries allowing them to create competitive pricing strategies which in turn provided sustainability over time. The findings provide empirical support for prior theoretical frameworks on guanxi development. Moreover, the development of a new framework shows how trust develops alongside guanxi in cooperative relationships. This contributes to an understanding of country specific factors enhancing prior theoretical models of trust.