Negotiations, Chinese Style
Strategic preparation and cultural awareness can sharpen the competitive edge for companies negotiating in China.
by Betsy Neidel
For newcomers to the China market, as well as for those with established business relationships, China’s expanding economy and ballooning consumer demand can exert an irresistible pull. The ability to negotiate well, Chinese-style, constitutes a strong competitive advantage.
The Chinese view of negotiations
The Chinese word for negotiation—tan pan—combines the characters meaning “to discuss” and “to judge.” From a Chinese perspective, negotiation exists primarily as a mechanism for building trust so that two parties can work together for the benefit of both. Trust is built through dialogue that lets each party judge or evaluate the partner and the partner’s capabilities and assess each other’s relative status. The negotiation process also enables parties to reach an understanding on a specific issue, condition, or transaction, in a way that lets each side feel that “a good deal” was brokered. But the concept of negotiation hinges on creating a framework for long-term cooperation and problem-solving much more than on drafting a one-time agreement.
As such, negotiation in China is viewed as an ongoing, dynamic process that takes into account practical matters and context. Many Chinese prefer this approach over creating contract-based absolutes, which many Chinese perceive as the primary purpose of Western-style negotiations. Significant differences in negotiation style and culture can be accompanied by mutually unfavourable perceptions. Westerners may see Chinese negotiators as inefficient, vague, and perhaps even dishonest, while Chinese perceive Western negotiators as impersonal, impulsive, and overly focused on immediate gains.
When adapting to Chinese-style negotiations, task-based, time-conscious foreign partners must balance the need for quick settlement on specific issues and contract terms with the slower-paced and seemingly abstract building of interpersonal relationships. Competing effectively within a Chinese negotiation framework means understanding and accommodating the Chinese-style approach in order to craft a strategic plan that works on a local level.
Know the context of the deal
Understanding the circumstances and environment in which business takes place is critical. Because the business context in China can differ from what Western executives are used to or expect, investing resources in broad-ranging due diligence is often money well spent.
Chinese partners generally expect foreign parties to know and work within the local context, making ready access to local information and insights an important precursor to sitting down at the negotiation table. Local staff, local contacts, and external advisors can provide pre-negotiation guidance by knowing what questions to ask prior to and during the negotiation. They may also interpret and evaluate the answers received, in the context of the local business environment. A foreign partner that is knowledgeable about the local situation and circumstances is more credible in the eyes of the Chinese partner and will build trust.
Know your partner
Foreign companies must become familiar with prospective Chinese partners on the interpersonal and organizational levels, verifying credibility by looking at past track records and understanding the Chinese partners’ objectives for entering into a business relationship. Too often partners are chosen based on English-language capability alone or at a random meeting, rather than through a strategic screening process. Having a reputable local partner and being closely aligned on mutual goals are two prerequisites for successful negotiations and a lasting business partnership.
Put relative strengths and weaknesses in context
After a company gets to knows itself and its Chinese counterpart, it must evaluate the relative strengths and weaknesses of each side within the business context to prepare the negotiation strategy. The company also must understand its strengths and weaknesses compared to potential competitors—in terms of both price and non-monetary value.
For example, the Chinese partner is likely to rank potential partners against others and is often quite open about this during negotiations. It is not uncommon for a Chinese partner to say that it has received much more favourable pricing from the foreign company’s direct competitor. To minimise the focus and discussion on price, be prepared to highlight product values and company comparison in areas like brand recognition, quality, service, and overall perception in China.
Strive for operational readiness
Operational readiness means aligning internal organisational resources to work most effectively in Chinese-style negotiations. Most important is the creation of a highly disciplined, cohesive negotiation team that follows a unified communication plan. This differs from typical, unscripted Western-style negotiations, where each team member has an individual voice in the process and is encouraged to use it.
In the unified team approach, there is generally one designated speaker. If other team members speak, it should be from the plan or script, showing corporate consensus. Even in side talks, team members should never openly disagree, question each other, or air unresolved internal issues in front of the Chinese partners. In Chinese-style negotiations, saying less is always better than saying too much.
A unified team also designates individual duties for each team member; these often include that of notetaker, translator, cultural interpreter, and intermediary. Functions may overlap, but all are typical and expected in Chinese-style negotiations. For example, the notetaker serves an important role because the Chinese partner may refer back to statements or concessions made in the past. Without accurate documentation, it will be difficult to contest specific statements such as, “During his visit last March, your New York vice president assured us that you would provide….”
Similarly, foreign companies should use their own Chinese translator even if an official interpreter has been provided. Much can be lost in translation without access to the full breadth of discussions in both languages, and many insights can be gleaned from the other side’s internal discussions. Showing a willingness to use both languages is also viewed as a sign of goodwill.
Negotiations are never “over”
All situations involving two or more entities in China require some form of negotiation, ranging from informal, friendly discussions with a long-term partner to formal bilateral talks. Chinese-style negotiation is the process of building and tending relationships to produce benefits for both sides. It is a process that does not end unless the relationship is severed.
This approach to negotiation is rooted in Chinese cultural, historical, and practical considerations and exists throughout modern China. It also differs greatly from the view that the negotiation ends when the contract is signed. From the Chinese perspective, the contract signing indicates the formal beginning of the partnership and with it, the commitment to the ongoing negotiation. In this context, successful foreign companies commit adequate time and resources to understanding and tending local China relationships for the long run.
UP CLOSE AND PERSONAL
When negotiating in China, what types of qualities are most likely to resonate? Though it is by no means exhaustive, this list provides some perspective on the types of strengths and abilities that would benefit members of the foreign negotiating team. The foreign team should:
- Be able to see the “big picture”;
- Convey clarity about the company’s purpose and objectives in China;
- Listen;
- Be patient and persistent;
- Control emotions, expectations, and ego;
- Have a thorough knowledge of Chinese culture;
- Make a commitment to understand and observe protocol;
- Have a good memory and pay attention to detail; and
- Be respectful, trustworthy, and sincere.
—Betsy Neidel
Betsy Neidel is a seasoned senior advisor specializing in US-China business and intercultural strategy and Managing Director of Blue Heron Holdings Inc.