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Negotiating in China: 6 tips in dealing with Chinese business partners

Negotiating in China can be a long, slow process. In fact, there is no one “way” of negotiating in China. There are many resources on Chinese business and negotiating culture available; however, sometimes they are overly general and reinforce stereotypes that may not be true. For more fruitful outcomes, foreigners are suggested to study their business partners at a deeper level, understanding the individuality while taking into account the backdrop of Chinese culture. It is for that reason that it is not possible to provide a single answer to negotiating in China. However, there are some key tips foreigners can ponder over before they meet their Chinese business partners, especially if they want to do business in China over the long run.

What to prepare for negotiating in China

Though superficial, there are some elements that should not be overlooked, like dressing modestly and formally, preparing business cards (which should be given and accepted using two hands), and preparing a gift, but what is more often overlooked is bringing patience. As a result of being more holistic and less straightforward, spending time to build relationships with counterparts, and willingness to go through grit, negotiating with Chinese businesses often takes much more time and investment than a western business might expect.

1. Build a strong “Chinese” negotiating team

When negotiating in China, it is suggested to build a stronger position by building a team. To appear fully resourced and prepared, having a team made up of both Chinese and foreigners and of individuals from relevant departments could be advantageous. Having Chinese team members who understand Chinese culture can help the team better identify and understand the nuances of their Chinese counterpart’s implicit language or explicit language. They can look for (external) intermediaries who can connect them with their Chinese counterparts so that the Chinese people can feel a stronger sense of trust towards them. This is because Chinese people prefer doing business with people they have personal connections with. Some of the roles of the intermediary include initiating the first contact, dealing with government and relevant local authorities, and resolving (cultural) differences. Also, having members from several yet relevant departments could help foreigners answer the questions raised by their Chinese counterparts. Including technical and financial specialists could be useful as technology and price are important to many Chinese businesses.

2. Leverage guanxi to win in the long run

Anyone who plans to continue their business in China over the long run should understand guanxi (关系), a Chinese concept referring to mutually beneficial, personal relationships. Guanxi can be built through long-term cultivation of personal exchanges and bilateral communication.

Taking part in the gift-giving culture in Chinese business could either initiate or strengthen the relationship. Foreigners can prepare gifts, such as souvenirs from their countries. However, it should be done with discretion. The gift should be given as a sign of respect and courtesy for an individual and commitment to creating or maintaining a relationship, not to “seal the deal”. Also, it is clearly provided in China’s Criminal Law and Anti-Unfair Competition Law to prohibit the giving and acceptance of bribes between businesses in a purely commercial context.

Although gift-giving does help start or advance relationships, it is not enough. Meeting beyond the confines of meeting halls is suggested. Chinese people seek to cultivate long-lasting relationships by extending their business relationships into the personal side. They want to learn more about the individual, especially outside the business arena, before they can give them their trust. Having a festive dinner with drinks and more personal conversations is encouraged. Foreigners can carefully make more personal questions as well as share their personal stories as they are not necessarily considered rude. They can also take part in the KTV and drinking culture in China. KTVs are popular entertainment venues where people can sing together, drink, and dance. Baijiu, the national drink made from fermented grain and known to bring luck, is generally a drink of choice.

3. Identify who the decision maker among your Chinese counterparts is

Although negotiating in China involves team communication, identifying who the decision-maker is crucial. There are chances that the Chinese counterparts will have their own negotiating team. Therefore, negotiators should discern who the ultimate decision-maker is. Once they do, they should be more cautious about what and how they communicate. But they should continue to build a relationship with the other team members, who influence the decision-maker.

Chinese culture is high in the ‘power distance’ metric of Hofstede’s cultural dimensions. This means as a society, they are accepting of inequalities amongst people, defined by their work positions. Hence, the power of subordinates and superiors in the workplace is very polarized. For negotiators, the implication is that subordinates have very little power compared to their leaders, and therefore negotiations must be handled with the decision-maker. At the same time, it’s important to send high-level representatives to the negotiation table, as sending lower-level employees may leave an impression that you don’t respect or take the Chinese counterpart seriously.

4. Saving face of your Chinese counterpart is strategically more beneficial

Saving face is decisive to negotiating in China. Foreigners should be careful not to damage the reputation of their Chinese counterparts – whether it’s intentional or not. The face reflects a person’s social worth, which is crucial in the Chinese business culture. A person’s level of attractiveness based on “wealth, intelligence, assets, skills, position, and of course, good guanxi” can be “quantitatively” measured to calculate their social worth.

Therefore, foreigners can give face to their Chinese counterparts by using the appropriate forms of address, complimenting them or their culture, and giving them their attention. But that does not mean saving their faces should be disregarded. Appearing childish or lacking the ability to control their emotions can make guests lose their face and thus appearing as less reliable and insincere. Although it may appear pretentious, showing a fake smile is preferred over losing one’s temper.

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Source: Baidu, Illustration of saving face, allow your counterpart to show their good side and don’t put in effort to uncover any personal flaws.

5. Show understanding of the Chinese government

Understanding how China’s business environment is interlinked with the government is necessary for foreigners if they want to do business there. Expressing understanding or even their plans on building a good relationship with their Chinese counterparts and the government could make foreigners appear more attractive or prudent. The government can largely influence businesses – whether foreign or local and private or public. Under the ‘Common Prosperity’ Initiative, the government has been tightening regulations to balance wealth and establish a more sustainable economic model. Crackdowns in livestreaming, education, and video games, for example, have raised the need to align business interests with those of the government.

In any circumstances, we strongly advise against criticizing the government because damaging the face of the government may cause the other to lose face.

6. Show “grit” in your negotiations

Asking questions is a powerful tool that can be used to show grit. Ironically, playing dumb and asking thorough questions on topics you likely already know the answer for can earn respect from Chinese business negotiators, according to Harvard Business Review. In line with the Chinese value of hard work, asking plenty of difficult questions makes them appear to have more endurance, a quality valued by many Chinese people, and as they may be exposing the weakness of the other side. However, be careful not to directly ask the same question but rather patiently ask repetitive, indirect questions. Otherwise, they may pressure their Chinese counterpart and make them lose face.

Asking questions does not only show strength but also helps identify what exactly the other side wants. This may be helpful for individuals who may have a hard time reading between the lines as China is a high-context culture. In other words, asking questions could help more accurately understand what the other side wants since interpreting the nonverbal context can be hard for some.

Negotiating in China can be a long, slow process

The deal-making process in China is so slow that westerners may even consider it inefficient. Therefore, they should have the patience to establish a relationship first, which may take a long time. The strength of the relationship, however, should not depend on contracts but on moral obligations. Chinese people generally focus more on the “imaginary” moral relationship as it had been largely influenced by Confucian values of solidarity, loyalty, and courtesy.

Also, although discussing concrete matters may be more time-effective and efficient, foreigners should note that Chinese people prefer starting with general principles first and then moving on to more specific decisions. Even when discussions on specific terms are done, foreigners should expect discussions to be held in a haphazard order and agreements to be revised. Therefore, the negotiation process in China may take a long time.

Essentials on negotiating in China

  • Negotiating in China revolves around groups of people, not individuals. Businesspeople should their own negotiating team, and if possible, its best to include Chinese members in the team.
  • Although there may be a negotiating team, some people, especially the decision maker, are more important than others. Even when coming from an egalitarian society like many western countries, it’s important to respect the Chinese hierarchy.
  • Building guanxi is highly recommended if one plans to do business in China in the long-term. It may even speed the negotiating process if a strong relationship between the foreigners and their Chinese business partners has already been established.
  • Keeping peace on the “surface” by maintaining or strengthening the “face” of the Chinese counterpart and the government can foster a deeper relationship. Never act out when angry or upset, or it could mean losing the deal.
  • Negotiating in China is expected to take a long, slow process. Therefore, it is advised to have the patience to establish a relationship first and then dive into closing the deal.

Learn more about how to negotiate for mutual gain in China

Do not hesitate to reach out our project managers at dx@daxue-consulting.com to get all answers to your questions

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