Competitors are increasingly forming partnerships to improve their capabilities to respond to customers and solve problems. This study uses research on guanxi and conflict management to identify critical conditions that facilitate effective collaboration between competitors. It theorizes that a high level of guanxi promotes cooperative and reduces competitive approaches to conflict that in turn facilitate partnership effectiveness. Data were collected from 100 paired competitors, operating in many industries in Shanghai, China. Results from the structural equation analysis indicated that a high level of guanxi reduces a competitive approach to conflict that in turn results in partnership effectiveness. These findings were interpreted as providing support that a high level of guanxi and a reduced level of the competitive approach to conflict are foundations for effective collaboration between competitors in China and perhaps in other countries as well.