When negotiating with the Chinese, there are many factors that can influence the chance of a successful outcome. In an extract from their book: The Chinese Negotiator: How to Succeed in the World's Largest Market, Robert M March and Su-Hua Wu offer some negotiation suggestions to help smooth the way.
If you are preparing to negotiate with the Chinese and want to do it in a culturally appropriate way, it is helpful to first understand how they negotiate with one another.
The degree to which the Chinese trust each other is the key factor dictating the outcome of their negotiations. Transactions conducted between Chinese parties who completely trust one another show that what one side proposes, the other accepts with little or no adjustment.
COMPLETE TRUST
When there is complete trust in China, the need to negotiate disappears. When one family member (or a friend with similar status) asks another to supply a good or service, the quality, price and delivery may be specified – but there will be no bargaining. Based on past experience, the buyer will assume that the relative or friend will do everything possible to supply the best-quality goods or service at the best-possible price.
The Chinese put demands from long-time friends ahead of their own. Moreover, they are reluctant to ask for or accept money from friends for minor services. Genuine friends, most Chinese believe, bind themselves to one another by doing favours or giving small gifts in the spirit of reciprocity, which to many is the essence of Chinese culture. Receiving payment for performing a service for a friend is thought to destroy the basis of the relationship by making it commercial.
The stranger – whether Chinese or foreign – occupies an ambiguous place in a low-trust society such as that of China. The people closest to you are family and friends; the rest are strangers (shuren; literally, 'raw' people). Since strangers are thought cold and distant, the Chinese are not known for public courtesy to them. Negotiations will not be able to begin until strangers have developed a rapport that allows mutual trust to develop.
CONFUCIAN VALUES IN NEGOTIATION
Members of the well-educated and cultivated middle and professional classes display many aspects of Confucian morality. They have a sound knowledge of Chinese history, its anecdotes and lessons, as well as the legends illustrating many of the moral maxims of Confucius and other sages.
In contrast, those Chinese who neither respect and obey their parents and elders or their surrogates, nor accept the moral and ethical precepts of Confucian values, will not fit comfortably into mainstream society.
Most Chinese government officials and businesspeople, especially in the coastal regions and cities, recognise that if they are to do business successfully over the long term with other Chinese whom they have not met or with whom they have not done business before, it is first necessary to develop a friendly working relationship in which all parties are comfortable. This, in turn, leads to trust and respect.
RECIPROCITY IS KEY
The Chinese do business with you as a person, not as an organisation: hence the belief that friendship between organisations derives from friendship between individuals.
Moreover, as the Confucian ethic bases relationships on reciprocity, the junior's loyalty, filial piety, obedience, and respect for the senior party are expected traits. In turn, the senior individual must be righteous, benevolent, charismatic, and loving; otherwise the junior party can disobey and even choose a better senior.
NOT A TEAM SPORT
Since Chinese negotiators are person-oriented, rather than team- or system-oriented, they believe themselves accountable only to their own constituencies or their immediate bosses. Thus they are not good team players.
Moreover, although most Chinese think carefully before making or rejecting an offer, the fact that they do not always function well as teams can make them seem unorganised and chaotic, as they play power games while trying to gain personal benefits or recognition from their superiors or the other side. Chinese negotiators can also be flexible on some matters (such as agenda and documentation) but stubborn on others (firm price offers).
Nearly half the businesspeople living in coastal regions (especially in Beijing, Shanghai, Guangzhou and Tianjin) see themselves as systematic negotiators who abide by international conventions. The remainder tend to consider their negotiating strategies unsystematic and unplanned.
Team design and functioning can thus be problematic when, for example, Communist party cadres are included in negotiating teams: role allocation is lacking, members confuse their job titles with their negotiating roles, and everyone talks at the same time. The fact that one side's position, or its final decision, is non-negotiable because it came from the top administrator, who is often not the chief negotiator, and not even present at meetings, can intensify discord within the team.
INDIVIDUAL NEGOTIATORS
On a positive note, some veteran negotiators maintain that they use rational and principled negotiation strategies. They take the initiative, give in on minor issues without sacrificing their principles, and present justified counter-proposals.
Technology transfer and joint venture negotiations see more professional, expert and responsible negotiators than do trade talks. The former draw more on systematic strategies, and exhibit better business ethics and teamwork.
The quality of players in business negotiations has changed over the past ten years, and their negotiating competence has improved. Previously, negotiators were often communist party cadres, sloppy in appearance, with approaches to negotiating that were clouded by politics and ideology. Today we can see that China's businesspeople are becoming increasingly professional in their dealings with one another, and communist cadres, when they appear, are better educated and more sophisticated.
Most Chinese consider themselves careful thinkers, patient negotiators, friendly, hospitable and helpful. At the same time, they also see themselves as tough, clever, confident, profound, wise, and sometimes difficult negotiators. They are, thus, particularly cautious when dealing with other Chinese whom they do not know well, in the knowledge that, should matters not go smoothly, they may have a monumental fight on their hands – something to be avoided at all costs.
OUTWARD APPEARANCE
Chinese negotiators vary widely in their dress, speech and manners. Those from coastal cities consider their appearance acceptable, while those from inland areas hold a negative view of their own appearance and manners. Coastal people say that many of their associates and buyers from the country lack fashion sense, cannot coordinate clothes, have poor posture and lack social manners. Some, they say, look like farmers (because of their deeply tanned faces), and indeed many are part-time farmers.
Inland negotiators, believing themselves to lack social skills, arrange many ceremonial activities as part of the negotiating process, for example, taking visitors sightseeing and inviting government officials to give speeches at banquets. The implication seems to be that they lack the confidence to develop personal, one-on-one relationships with the more sophisticated people from coastal areas.
BANQUETS AND FRIENDSHIP
Banquets, which feature in all Chinese relationship building, have deep cultural underpinnings. Eating together has long been considered the best, most civilised way of creating an atmosphere that will foster friendship and good humour. Shared meals are central to Chinese life because they are seen as reinforcing human relationships. In business, they also provide an opportunity to discuss issues that have proved intractable at ordinary meetings.
Banquets can be daily events, organised at the personal, official, governmental, company or factory level. The Chinese will find any number of reasons to hold a banquet, including birthdays, weddings, promotions and moving into a new house.
'GETTING TO KNOW YOU'
Groups that are considering doing business together devote their initial meetings to becoming better acquainted.
The initial encounters are likely to involve a number of dinners or banquets that are also business meetings. Alcoholic beverages will flow freely – cognac in the largest cities; and inland, beer or baijiu (a potent white liquor, with an alcohol content of between 55% and 65%, that is sometimes referred to as the national drink). It is regarded as rude to turn down the offer of a drink, so one must be prepared to deal with the consequences of drinking large quantities of liquor. Note that baijiu is not regarded as a drink for women, and those who do drink it may be derided.
Toasting is de rigueur at any banquet or party. All parties will make many small toasts throughout the night, always drinking with others and never alone.
When companions' glasses are empty, etiquette requires that one fill them, starting with whoever has the most seniority and always pouring for oneself last. When someone pours a drink, the recipient should hold the glass up with both hands (placing one hand on the bottom of the glass) and stand to acknowledge that a gift is being received. Even if there is no one to be toasted, there is pleasure to be had in drinking together.
Two sayings in particular epitomise this culture of drinking and conviviality: "The truth [about you] comes out when you drink" (Jiu hou tu zhen yan) and, "Don't pretend [be yourself]" (Tan cheng xiang dui). Threaded through all convivial drinking scenes will be many occasions when both sides seek mutual opportunities to give face. Such details as hometown, alma mater, successes, and achievements – the focal points of one's Chinese identity – will be noted and praised to those assembled.
As the friendship begins to develop, there will probably be a series of parties or banquets with a similar atmosphere of goodwill, and all the while business will be discussed and, perhaps, deals struck.
The CEOs – the company decision makers, or vice-mayors of cities who are one-man managers of the local economy – will stay out of sight but may come together at the final dinner, in a private room over cigars and cognac, to reach agreement on future cooperation. They will then pass over to their team of managers the tasks of working out the details and plans. CEOs keep out of sight so that their managers can relax, be themselves, and better enjoy the event.
COMMUNICATION
Goodwill and good humour greatly depend on harmonious, friction-free, argument-free conversation, which is usually loud and boisterous, cheery and manly.
No one will be interrupted; everyone is permitted to finish their remarks and is given due respect. This is possible because there is a definite culture of listening, rather than talking, among the Chinese. The essence is to focus on the speaker, show interest, and never interrupt.
SPIRIT OF RECIPROCITY
Negotiations among the Chinese depend on the degree to which they trust each other. It is standard policy for long-time friends to put the other party's demands ahead of their own. People are reluctant to ask for or accept money from friends for minor services. Friends make binding ties by doing favours or giving small gifts in the spirit of reciprocity, which many believe to be the heart of Chinese culture.
When there is no mutual trust, some may use fraud, bribery, threats, intimidation and other forms of deception to achieve a goal they would have tried to achieve by negotiation had the other party been a friend.
The Chinese do business with you as a person, not as an organisation; hence the belief that friendship between organisations derives from friendship between individuals. When considering negotiation with the Chinese, it is most important to be friendly and get along comfortably with others.
