Cross Cultural Management: An International Journal

Negotiating with Chinese: a cultural perspective

Paul HerbigDrew Martin

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Paul HerbigDrew Martin, (1998),"Negotiating with Chinese: a cultural perspective", Cross Cultural Management: An
International Journal, Vol. 5 Iss 3 pp. 42 - 56
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Cross Cultural Management

Negotiating With Chinese: A Cultural

Perspective
Paul Herbig and Drew Martin

The authors
Paul Herbig is Managing Director of Herbig and Sons, Marketing Consultants, 13818 Shavano Ridge, San Antonio, Texas 78230.
Drew Martin is Professor of Marketing and International Business, and can
be contacted at the University of Oregon.

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Abstract
This article is about the cultural aspects of negotiating in China. Chinese
and Western approaches in negotiations are different. Therefore, understanding Chinese negotiating techniques and motivations may save much
frustration and money. Moreover, a solid appreciation for Chinese behaviour and culture can help a foreign company use the Chinese approach to
negotiate to its own advantage.
The first section is about the cultural factors which influences Chinese
behaviour. This basis is mainly grounded on Confucianism. This influence is
shown in several aspects of Chinese life, such as in the person to person relationships, the form of addressing one another, and the extended family.
The family has always been a celebrated institution in China, and its hierarchy is carefully preserved. Also, people are taught to be humble and undemanding since modesty is a virtue in China. The loss of face is a terrible
embarrassment for any Chinese, so they will never insult or openly criticise
anybody. Finally, personal relationships are very important, powerful, and
long lasting in China.
The second section is about the Chinese negotiating process. Chinese
do not do business with people they do not know or trust. So, it is very important to develop a stable and friendly relationship based on mutual trust
and admiration before reaching an agreement. Several topics that help to
build this relationship are the effects of a polite conversation, credibility and
reliability, the effect of hinting, modesty, and the role of banquets. The Chinese approach to negotiations focuses on personal relationships instead of
the Western approach of relying on contractual relationships. Western executives generally try to resolve all issues through legal stipulations in the
contract, while the Chinese will try to rely on friendly negotiations. China is
a collective society; therefore, consensus building is a necessity for Chinese
negotiators, and this consensus takes time, so Western negotiators must be
patient and understand that there is no incentive for individual decisions on
the Chinese side. Moreover, other aspects such as fairness, initial meeting,
interpreters and specific issues are studied in this section. Finally, the Chinese are the masters of negotiations for two reasons. First, they understand
the importance - and pressures - of time, and they exploit them. Secondly,
they hold tightly to their negotiating stance to the point of intransigence.
Therefore, being aware of these tactics and knowing the Chinese approach
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Volume 5 Number 3 1998

to negotiations will help in reaching an agreement and conducting business
in China, an interesting culture.
Introduction
China is a group-oriented society and any negotiation must cover the interests of many different parties. The Chinese rank among the toughest negotiators in the world, but they are reputable and honourable.1 In addition,
China is probably one of the most difficult countries to understand and
adapt to. An understanding of the Chinese style of doing business is essential before beginning ones pursuit of business in China.

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The Confucian Legacy

The Chinese attitude toward life is influenced by Confucian ethics, which
teach Chinese to respect and love their fellow Chinese.2 Chinas traditional
values were contained in the orthodox version of Confucianism, which was
taught in the academies and tested in the imperial civil services examinations. These values are distinctive for their this-worldly emphasis on society
and public administration and for their wide diffusion throughout Chinese
society. Confucianism, never a religion in any accepted sense, is primarily
concerned with social order.
The Confucianists claimed authority based on their knowledge, which
came from direct mastery of a set of books, the Confucian Classics. The mastery of the classics was the highest form of education and the best possible
qualification for holding public office. Confucianism put great stress on
learning, study, and all aspects of socialisation. Confucianists preferred internalised moral guidance to the external force of law, which they regarded
as a punitive force applied to those unable to learn morality. Confucianists
saw the ideal society as a hierarchy, in which everyone knew his or her
proper place and duties. The existence of a ruler and of a state were taken
for granted, but Confucianists held that rulers had to demonstrate their fitness to rule by their merit. The essential point was that heredity was an
insufficient qualification for legitimate authority. As practical administrators, Confucianists came to terms with hereditary kings and emperors but
insisted on their right to educate rulers in the principles of Confucian
thought. Traditional Chinese thought thus combined an ideally rigid and hierarchical social order with an appreciation for education, individual
achievement, and mobility within the rigid structure.
Tradition values have clearly shaped much of contemporary Chinese
life. The belief in rule an educated and functionally unspecialised elite, the
value placed on learning and propating an orthodox ideology that focuses
on society and government, and stress on hierarchy and preeminent role of
the state were all carried over from traditional society. Some of the more
radical and extreme policies of the Maoist 1950s and 1960s, such as attacks
on intellectuals and compulsory manual labour for bureaucrats, can only be
understood as responses to deep-rooted traditional attitudes. The role of
model workers and soldiers, as well as official concern for the content and
form of popular literature and the arts, also reflects characteristically Chinese themes. In the mid-1980s a number of Chinese writers and political
leaders identified the lingering hold of feudal attitudes, even within the
Chinese Communist Party (CCP), as major obstacle to modernisation. They
identified such phenomena as authoritarianism, unthinking obedience to
leaders, depracation of expert knowledge, lack of appreciation for law, and
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Cross Cultural Management

the failure to apply laws to leaders as feudal legacies that were not addressed in the early years of Chinas revolution.3
Person to Person Relationship

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Chinese will go to extreme means not to embarrass another person, whether

friend or foe.4 The concept of face is very important in dealing with others
in order to avoid loss of self- respect or prestige by either party. It also refers to ones ability to deal smoothly with people face to face.5 Chinese
never say no to any request or outwardly disagree with anything. If someone responds to a request with later and later forgets, it probably means
that he or she cannot do the favour. The Chinese have been brought up to
mask their feelings, often by smiling or laughing. Chinese frequently respond with laughter or smiling when a person speaks of an embarrassing
topic or in the wrong, which will persist if the talk does not shift topics.
When two Chinese get to know each other, they have established
guanxi, or relations. Guanxi contains implicit mutual obligation, assurances
and intimacy, and is the perceived value of an ongoing relationship and its
future possibilities that typically govern Chinese attitude toward long- term
business; therefore, Guanxi is much more important than only having contacts as Americans believe.6
Chinese are also super hosts. Tables are often filled with food even after dinner is through. This seems like an incredible waste, but to the Chinese, empty plates mean their guests are still hungry and they have failed as
hosts. Chinese modesty does not allow them to receive flattery, but to give
it. Compliments are often brushed aside with an embarrassed laugh and a
returned compliment.
Forms of Addressing One Another
The Chinese have a title for every member of the household. This came
about because historically the Chinese family was an extended one with several generations living under one roof, and one had to be able to identify
everyones position in the family.7 Chinese never ask how many brothers
and sisters one has, but how many are older or younger than one. Elder
brothers are called gege while younger ones are didi. Jeijie refers to
elder sisters while younger ones are called meemei. Different sets of names
are given to each maternal and paternal grandfather and each aunt and uncle.
Outside the family, Chinese of all ages are known by their surname.
Most of the time, xiao meaning little, is used as a prefix for younger people and lao, meaning old, is put in front of the surname of a middleaged person to show respect for his or her age and experience. These prefixes are used only for persons one is familiar with. In formal address, the
surname is put before xiansheng (mister). Women keep their maiden
names after marriage, replacing missing with madam behind their surnames.
Teachers are well respected and laoshi, meaning teacher, is always
added behind their surnames. Often, people in the streets address strangers
as tongzhi, or comrade, when asking for directions or buying things.
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The Extended Family
In China, life revolves around the family. It is often common to find three
generations living together under one roof in the city, while in the countryside it can be extended to include uncles, aunts, numerous cousins and inlaws.8 The oldest relative in the family is always looked upon as a person of
wisdom whose word is usually law. Elders are respected even if they are ill
or bedridden. They are only sent to hospitals or institutions if the family
cannot provide them with the proper care.

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The greatest joy for the older generation is to see the whole family
around them, the more males the better, as they are secure that the family
name will be carried on. The family hierarchy is carefully preserved and
each member of the family knows where he or she stands even if the difference in age is only a few days. The younger generation is not expected to
talk back or disobey orders. Babies are well-loved in any Chinese family.
With the one-child policy implemented across China, the precious child is
doted on and given almost everything it asks for. In the extended family, babies are certainly king.
Adult Chinese live with their family until the time they get married.
Upon marriage, the woman moves into husbands parents home. The main
reason why a Chinese man lives at his parents home is that it is a childs
duty to look after his parents until their death.
Negotiating with Chinese
A good negotiator in China must understand not only the Chinese negotiating tactics but also the impact of the human behaviour over the negotiations evolution in order to conclude in a good deal. Therefore, due to the
Chineses emphasis upon personal relationships this section has been divided mainly in two parts. The first part studies how to build a good relationship with the Chinese and the second discusses the process of
negotiating.
Building an Inter-Cultural Relationship
The Chinese people are very sensitive to linguistic expression and courtesies. During your associations with Chinese people, you will quickly learn
that what they say, and how they say it could imply many subtle meanings
which differ from yours. Inappropriate language, expressions, or manners
might bring failure to your business; on the contrary, a proper word or manner is likely to make a cloudy day become like the sun.9
The Effects of Polite Conversation
Hi! is usually the way Americans greet each other. If you greet a stranger
in China this way, it would result in one of two possible outcomes. First, the
person may be shocked. Second, the person might consider you to be warm
and polite and that you will talk with everybody. Therefore, a way to solve
this situation is just modestly smiling a little or nodding slightly to the other
person.
Of course, if you are introduced, the result is completely different. Even
in this situation, you still need to be aware of your actions. If a friend introduced you first, you would be the first to greet and stretch out your hand; if
you were introduced later, you should follow the others behaviour. After
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being introduced, if you meet this person again, greet him or her on your
own initiative, then speak some polite words. [Polite Chinese greetings are
usually, Where are you going?, What are you doing?, Are you busy?,
Have you eaten?. Those common and normal phrases are not an invasion
of privacy, they just emphasise the Chinese concern for others. Thus, you do
not need to answer them in a serious manner]. Often, when you are extended an invitation it is difficult to identify whether it is a real one or just a
courtesy. The best way to know this is to tactfully say, Thank you, I do not
want to bother you. If your friend insists, you could respond by declining
again. But if your host insists again that means that he or she really want to
invite you. Therefore, if you decline one or two times, and are not invited
again, you know the invitation was just a courtesy.
When you help somebody in China, and he or she says thanks to you
you should reply, Not at all. I am sorry I did not do a better job. If you respond with the classical American phrase Sure! people will think that you
are immodest, because your response may mean, Yes, since I did something for you, you certainly should thank me. There are some delicate topics for American that are more openly discussed in China. For instance,
Chinese people like to talk openly about salaries, age, prices, and other people. So, do not feel uncomfortable when these topics show up or when you
are asking about your age.
Keep Your Credibility, Do Not Speak Too Much
Credibility and reliability are the fundamental principles for conducting
business with the Chinese people. In a sense, your credibility and reliability
are judged by how you talk. For example, when a Chinese company expressed interest in buying machine tools from a Japanese company, the
Japanese staff spoke too much, boasting about their products. The Chinese
company began to suspect the quality of the machine tools and suspended
contract negotiations. On the other hand, a German company understood
this cultural tradition when they initiated their negotiations. The staff of the
German company did not describe their machine tools as superior and
number one in the world as the Japanese did, but rather analysed the
strengths and weaknesses of their products in comparison with the Japanese
products. As a result, the Chinese company viewed the Germans as credible
and reliable and signed a contract with them. The Chinese people dislike
boasting and excessive descriptions because it makes them believe you may
have something to hide.
The Magical Effect of Hinting
Very often, the Chinese people drop hints to others about what they really
want to say. One of the reasons that the Chinese hint arises from their selfcontrol and the mode of thinking rooted in the doctrine of the golden mean
in traditional Chinese Culture. In fact, one consequence of this doctrine is
that people dislike expressing themselves too obviously. Additionally, selfcontrol tends to make people shy in openly revealing their needs and
thoughts. For these reasons, hinting became a characteristic of the Chinese
people.
Undoubtedly, Chinese people use hinting when conducting business.
For example, two companies that had established a good relationship were
negotiating the price of machine tools. The Chinese company thought the
price was a little bit higher than they were willing to accept. They hoped the
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other side could reduce the price, but they did not wish to express this directly. During their conversation, the Chinese staff mentioned the possible
development of a big machine tool plant in China. This remark was really a
hint implying that a business deal may be possible when the machine tool
plant is built if the price of machine tools was lowered now. If the prices are
too high for a Chinese company to accept, they may openly discuss this fact
with you; however, if there is a change of conducting business, they will not
risk hurting your feelings by discussing price with you. Instead they will
drop hints.
Of course, in many cases, Chinese are likely to speak openly, frankly,
and directly. Generally speaking, Chinese will not hint if an important principle or critical matter is at stake. The Chinese will speak openly, frankly,
and directly if it will not hurt others and if they are dealing with intimate
friends.

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Modesty and Bragging

In the latter part of the 1970s, when the Chinese began to associate with
American visitors, both groups often had a dilemma in understanding modesty and bragging. For example, when a Chinese praised an American by
saying, How beautiful your clothing is! the American said, Thank you.
However, when an American praised a Chinese person in the same way, the
Chinese would say, No, no, no, yours is more beautiful than mine. The
Chinese reply to anothers praise by first stating NO, and then praising
that person or acknowledging a weakness in themselves. Typically, they will
not accept anothers praise directly.
On one hand, traditional Chinese civilisation advocates modesty, and
on the other hand, the traditional dialectical mode of thought of Yin and
Yang influences Chinese behaviour. For example, Confucius advised people
to prevent four faults: Do not fabricate without foundation; do not make
an arbitrary decision, do not stick stubbornly to ones own opinion; do not
be too self-important. The fourth was to advise people to be modest. All in
all, modesty is a virtue in China; therefore, when you hear somebody praise
you, you must respond to him or her with a negation.
The Role of Banquets
The Chinese are looking for a long relationship involving mutual friendship
and mutual trust. They need to develop confidence in their prospective partners before committing themselves. For this one needs a strong head and
strong stomach, because banquets and other social occasions are a vital part
of doing business in China - bonding through glasses of lethal Mao Tai liquor.10 Any foreign businessman who tries to circumvent this process is unlikely to get very far. To the time-is-money Western businessman, this
process may seem frustrating and old- fashioned, but that is the way the
Chinese do things. It is congenial, and to their way of thinking, likely to create a more- lasting relationship.
In China, there are many complicated eating rituals. For example, if the
Chinese have an important guest visiting from far away, they hold a welcoming banquet. The guest might then give a reciprocal banquet. When the
guest leaves, the Chinese host provides a send-off banquet, and he or she
may hold a banquet for the success of your visit. During the banquet, eating
is very complicated.11 As a guest, you should wait until your Chinese hosts
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invite you to sit at a seat according to their arrangement. After everyone

takes their seats, the cook starts to make the first course, and only when the
first course is almost finished will the cook start the second course, and so
on, until at least eight courses and two kinds of soup are consumed. People
use chopsticks for their meal in China, but a foreigner does not have to feel
guilty for not knowing how to use them. Before the banquet you can tell
your host that you want to use a fork and spoon.
Although many Chinese people do not drink alcohol as often as some
Europeans, wine is absolutely necessary at a banquet. In terms of Chinese
tradition, a banquet is not complete without wine. People usually evaluate
the quality (or level) of a banquet by the kind of whisky served. When the
banquet starts, each man is given a cup of whisky. Women may have whisky
too, if they want, but generally they drink wine. Everyone stands up and
lifts his or her cup to drink. The host proposes a toast, and the people respond by saying, Ganbei!. You should only take a sip of your whisky or
wine, then sit down and slowly enjoy your drink with your meal. You must
engage in lively conversation with your friends and click glasses with each
other. Having a silent drink, as some Americans do, is impolite. If people
propose a toast to you, you must accept each others toasts, but you may not
appear drunk, so just sip a little bit. If you are able to hold a lot of whisky,
people will respect you as a hero.
Cross-Cultural Differences in Negotiations
In negotiations, Chinese and Westerners often find the others approach
maddening. Westerners generally want to charge into town, hammer out a
quick deal, sign the contract, then head home to proclaim victory at headquarters. The Chinese approach is to arrive in town when convenient,
slowly build consensus for a project, get to know and trust the partner fully,
acquire as much technical information as possible, hopefully get somebody
else to sign the contract, then head home to worry about what they might
have lost.12
For the Western firm, therefore, understanding Chinese negotiating
techniques and motivation may save a lot of frustration and money. Moreover, a solid appreciation for Chinese behaviour can help a foreign company
use the Chinese approach to negotiate to its own advantage.
Until Death Do Us Part
A business relationship in China is often likened to a marriage, and the Chinese partner wants to know if the Western partner will make a good spouse.
In the West, a business relationship is often regarded as little more than a
marriage of convenience, and the marriage contract is more important than
the personal feelings of bride and groom. For the Chinese, the personal relationship is of paramount importance and defines the parameters within
which business can be conducted. The role of negotiations is not merely to
come to an agreement on specific terms, but to learn more about the other
side and decide if there is a basis for trust and true collaboration. If a contract is subsequently signed, it is largely considered just one more event in
the course of building the relationship.
Western executives, however, generally consider the contractual relationship to be the most important element in formal business dealing. The
goal of negotiations is the signed contract, and the contract defines the pa46

Volume 5 Number 3 1998

rameters of the business relationship. Since the contract is considered the
prize, Western business executives are naturally impatient to reach the goal.
But the Chinese are extremely distrustful of foreign firms seeking to make a
fast deal. This is slowly changing; the trend among younger Chinese is to
conclude business deals much more quickly than their elders. But trust
building is still essential.
This difference in approach also affects how parties attempt to solve
problems. Western executives generally try to resolve all issues through legal stipulations in the contract, while the Chinese will try to rely on
friendly negotiations. In fact, the Chinese generally insist that a friendly
negotiations clause be put into the contract, which obligates the parties to
make a good faith effort to resolve any differences before they enter formal
arbitration. Given the embryonic state of business law in China, foreigners
may do well to rely as much as possible on such friendly negotiations.

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Group vs Individual
Chief negotiators for most Western companies are often empowered to
make many critical decisions on the spot during negotiations. They have little need for extensive consultations outside the negotiating room to conclude a deal. Among Chinese negotiators, however, the situation could not
be more different. In large part, this is because the structure of the Chinese
system makes consensus building a necessity. The negotiations with the prospective Western partner is just one piece of all the negotiations the Chinese
firm must conduct to get the whole deal approved and implemented. Typically, the Chinese firm must also negotiate for political and financial support among a wide group, which includes all possible customers,
prospective vendors, available suppliers and local government officials, all
of whom must be convinced they will not lose out if they join the project.
Another factor is that individual Chinese negotiators (typically being
bureaucrats) generally have little incentive to put themselves on the line for
a deal, they will certainly be penalised for making the wrong decision, and
not necessarily rewarded for making the right one. Also, Chinese negotiators rarely receive any sort of bonus or raise for concluding a deal quickly.
Such consensus building takes time, specially in the state-run sector,
and can be a very contentious process. Many Westerners get terribly frustrated when they are sent off to see the sights yet again. But often, the Chinese side is using this time to hold very delicate internal negotiations, and it
may be best to relax and don a good pair of walking shoes.
Attempts to discuss an item not listed on the agenda also can be frustrated by the need for consensus. The response to unexpected subjects will
likely be stony silence, if it is not downright negative. Obviously, one reason
is because a Chinese negotiator cannot receive approval to discuss an issue
not included on the planned agenda. But after the initially cold reception,
Westerners often find that such issues emerge as a popular topic of discussion a few days later.
Another frustration for many Westerners is that their Chinese counterparts often ask for a great deal of technical information, and very often they
ask for the information repeatedly. In the West, as noted Ernest DeBellis, a
former general manager of the Shanghai joint venture of Massachusetts
Foxboro Company, if you repeat yourself, everybody falls asleep. In China
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Cross Cultural Management

repetition means that you are really serious, repetition is important in that
culture. It is incredible how much you repeat yourself to be effective.

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In large part, the Chinese negotiators main task is actually to build

consensus on the Chinese side. This means they must fully understand the
technology or contract in order to convince others of its value. One way to
keep the process moving is for Western negotiators to fully explain all the
risks and benefits of the deal for the Chinese side. They also should explain
exactly what the Western company hopes to do, this gives the Chinese negotiators the tools to educate and convince superiors of the merit of the project.
Potential investors should be aware, however, that some Western companies found their potential partners were actually using the negotiations
simply as a boom. Some Chinese firms will have no intention of buying your
product, but they wish to gather as much information as possible on the latest technology. To protect any companys proprietary know-how against this
type of behaviour, it is important to be selective in sharing detailed information or technical specifications. Even in the world of competitive pressures,
foreign firms should have a signed contract or licensing agreement in hand
before letting out any truly proprietary information.
Fairness
The issue of fairness tends to come up often during negotiations with the
Chinese. On one hand, the Chinese want to know that you are treating them
as fairly as you have treated other partners elsewhere. On the other hand,
the Chinese mistrust of Western imperialism often leads them to demand a
level playing field, where they are treated as equal to their technologically
sophisticated partner. If the Chinese believe that the foreign partner is gaining a greater advantage than they are, it will be difficult to close a deal.
This mistrust in Westerners comes from both Marxist- Leninist and
Maoist ideologies which have especially affected Chinas interpretations of
world events.
Initial Meeting
Since the Chinese like to view business relationship as a marriage, the initial
meeting should be viewed as a first date. Like most first dates, it will be an
exploration of mutual interests and goals, a time for friendship and trust
building.
If the schedule and budget allow, it is a good idea to host a banquet or
dinner the night before the first meeting. This will give you an opportunity
to begin building trust and to learn more about your counterparts. If you
cannot host a banquet, you should start your initial meetings by asking
questions about your counterparts, their families and their backgrounds.
Unless your hosts ask you to do so, do not jump straight into business specifics. You may want to discuss your general impressions of the Chinese
economy and culture, and of course, your family and background. Do not,
however, criticise the Chinese government or bring up sensitive political issues such as prison labour or independence for Tibet. Also, Chinese are often uncomfortable when foreigners criticise their own governments.
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Setting the Agenda

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When business discussions begin in earnest, the Chinese typically like to begin with an agreement on general principles, to broadly define the nature of
the relationship the parties hope to build. The end result of this process will
be a letter of intent, a legally non-binding document filed with the local
government. The letter of intent represents a right of passage that allows
the Chinese entity to move ahead with serious and detailed discussions. At
first glance, this process may seem innocuous. But the Chinese will usually
soon thereafter present the foreign party with a proforma contract that becomes the basis of further negotiations. During these negotiations, a standard Chinese tactic to assert the foreign side is not living up to the spirit of
general principles. It is therefore extremely important to carefully consider
what principles you are willing to accept.
A good idea is to draw up your own letter of intent or memorandum of
understanding (MOU) and fax it to your potential Chinese partner before
detailed negotiations begin. While not legally binding, the MOU should include the same protective language you should use anywhere else in the
world. If you do not then get a general agreement on the MOU you have
drafted, it may be best to put off your departure. Such steps will help put
you in the drivers seat during negotiations and may considerably reduce negotiations time.
Interpreters
The PRCs official language is Mandarin Chinese, but there are more than
900 dialects. One mistake foreign firms often make is to rely solely on the
interpreter hired by the Chinese side. Regardless of this persons capabilities, it is virtually impossible for someone to translate for several hours a
day, several days in a row, and not make mistakes. For long discussions, it is
always best to have at least two fully bilingual people in the negotiating
room at all times. In this way they can switch duties when one is fatigued,
and they can help each other maintain a high standard of accuracy.
An important distinction is made between translators and interpreters
in the Chinese context. Serious misunderstanding can erupt if you rely on
someone who is interpreting rather than simply translating verbatim what
is being said. Many local Chinese translators, in their effort to add value and
to cut across cultural barriers, frequently shift roles (without notifying the
foreign firm) from translating information to putting a certain spin on it perhaps in both directions. At some point, this may lead to a great deal of
confusion as the interpreter seems to become a negotiator. Accordingly, it is
essential to explicitly communicate your instructions and expectations beforehand to the interpreter.
Experienced China hands often point out that a good interpreter can
provide the Westerner with an excellent opportunity to learn about the
needs of (and pressures on) the Chinese. Only a good interpreter can make
sure you really hear all that is being said and meant. A good interpreter can
also serve as an informal means of communicating outside the negotiating
room. The use of selected intermediaries is a time- honoured way of resolving differences and speeding the pace of negotiations in China. The Chinese
will often seek out your interpreter to clarify issues, raise new possibilities
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Cross Cultural Management

for resolving problems, explain the problems they may be facing (which
they could never discuss in a more formal setting), and to learn more about
you and your company. Western firms should learn to make good use of this
informal negotiating mechanism as well.
Control the Process
To avoid a bad deal, there are several basic steps you can take:13
- Let the Chinese know you consider business failure preferable to a bad
deal.
The Chinese can typically walk away from any business negotiation
without penalty, and they will definitely take advantage if they think
you do not have such freedom.
- Keep your schedule ambiguous

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It is a common ploy by the Chinese to try to pressure Westerners into

an agreement by delaying negotiations on critical issues until a day or
two before scheduled departure.
- If necessary let the Chinese know you are holding discussions with several
other Chinese companies.
They will certainly try to impress upon you that there are many other
foreign firms interested in their business, and they may even invite
your competitors to hold negotiations while you are in town.
- Do not make concessions too readily.
Chinese negotiators tend to adopt a rigid posture at the beginning of
negotiations and only grudgingly make concessions. Westerners tend
to begin with many alternatives in hand but to the Chinese this negotiating flexibility can signal insincerity.
-

Be extremely careful about what you say and to whom you say it.
The Chinese take copious notes during negotiations and often try to
leverage any perceived inconsistencies by quoting your words back to
you.

- Do not let the Chinese be the only record keeper.

You should make sure your side also takes detailed notes and that you
review them regularly.
- Remember that from the moment you step off the plane in China, you are
on stage.
Your behaviour is being monitored and evaluated, as are your words.
Examples of Chinese Negotiating Practices
These three brief anecdotes illustrate Chinese negotiating practices of time
pressures and intransigence:14
-

Asked about Chinas stance on the contested Spratley Islands in the

South China Sea, Beijing responded: China is prepared to discuss is50

Volume 5 Number 3 1998

lands which are under dispute. But for those islands where ownership
is indisputable, China will not negotiate. What is left unspoken is that
China, presumably, determines what is and what is not under dispute.
-

Chinas 5,000-year history also produces a different interpretation of

historical events. During Nixons first trip to Beijing in 1972, Henry
Kissinger asked Zhou Enlai, the highly respected Chinese foreign minister, his views on the French revolution and Europes age of enlightenment. We Chinese feel it is too soon to tell, was Zhous straight-faced
reply.

Beijing Jeep, the joint venture between Chrysler and Beijing Auto Industry Corp., took more than five years to negotiate. But, after two
months into operation, both sides agreed to throw out the clause which
had been the main sticking point for the final 30 months of talks.

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Conclusion
Prior to business initiatives, there must be an understanding of the Chinese
style of negotiating. There are significant differences in approaches. In
China, personal relationships are a quintessential basis for all business
transactions. The Chinese do not do business with people they do not know
or trust. Being impatient, demeaning, or critical is counterproductive. Developing an effective business relationship based on mutual trust and admiration takes time. Yet, while slow to develop, business relationships in China
can grow into friendships that last a lifetime. In addition, Western executives generally try to resolve all issues through legal stipulations in the contract, while the Chinese will try to rely on friendly negotiations. China is a
collective society; therefore, consensus building is a necessity for Chinese
negotiators, and this consensus takes time, so Western negotiators must be
patient and understand that there is no incentive for individual decisions in
the Chinese side.
When introductions take place, politeness and formality are critical.
Never insult or criticise a potential business partner. Losing face is a terrible
embarrassment for a Chinese person. The Chinese take their responsibilities
very seriously and consider meeting your expectations very important.
Businesspersons must be aware of and respect the vast differences that
exist between the American and Chinese cultures. For instance, family always has been, and will continue to be, an important and highly valued institution in China. Also, individuality has not been rewarded. The Chinese
are taught to be humble and undemanding as modesty is a virtue in China.
Finally, Chinese are the masters of negotiations for two reasons. First,
they understand the importance - and pressures - of time, and they exploit
them. Secondly, they hold tightly to their negotiating stance to the point of
intransigence. Therefore, being patient and knowing the Chinese approach
in negotiations and their business behaviour, will facilitate good agreements
and business relationships in China.
Recommendations
The recommendations for negotiating with Chinese people are the following:
51

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Cross Cultural Management

-

Get a good background about cultural differences that may affect a

business relationship, which means learning the influences of Confucianism and Communist in the Chinese society.

Be aware of developing Guanxi.

Enjoy the social events in China which are considered very important
by the Chinese.

Be careful with your manners; politeness and formality are critical.

Be modest, since modesty is a virtue in China.

Never insult or criticise your business partner, since losing face is a terrible embarrassment.

Adapt your approach to the Chinese approach in negotiating which is

focused on the personal relationship rather than the contractual relationship.

Be willing to talk about your family and background before jumping on

business itself.

Remember that the signed contract is only a means to get a deal. Mutual trust and respect are the paramount of the business relationship.

52

Volume 5 Number 3 1998

Endnotes
1. Philips Harris, Robert Moran; Managing cultural differences, p.401.
2. Http://1cweb2.loc.gov/cgi- bin/query/r?frd/cs:@field(DOCID+ch0065).
3. Http://1cweb2.loc.gov/cgi- bin/query/r?frd/cs:@field(DOCID+ch0067).
4. Http://sunsite.au.ac.th/Neighbour/china/lifestyle.html.
5. Kamal Fatehi, International Management, p.225.
6. Export Today, nov/dic1995, China: of sales plans and planned sales, p.48.
7. Http://sunsite.au.ac.th/Neighbour/china/forms-of-address.html.
8. Http://sunsite.au.ac.th/Neighbour/china/forms-of-address.html.
9. Quanyu, Andrulis, Tong;A Guide to successful business relations with the
Chinese, p.163.
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10. Geoffrey Murray, Doing business in China: the last great market, p.223.
11. Quanyu, Andrulis, Tong; A guide to successful, business relations with the
Chinese, p.206.
12. Export Today, June 1996, China: cause and effect, p.18.
13. Export Today, June 1996, China: cause and effect, p.20.
14. American Management Association, Scaling the wall of China, p.18.
Bibliography
Geoffrey Murray, Doing Business in China: The last great market. Ch.9, Negotiating skills required for succeeding in China, p.222-242.
Quanyu, Andrulis, Tong; A Guide to Successful Business Relations with the
Chinese, Ch.7. The skill of talking with the Chinese people, p.163-179, Ch.
9. The role of banquets, pp.195-213.
Philips, R. Harris, Robert T. Moran; Managing Cultural Differences, Peoples
Republic of China, pp.399-407.
Kamal Fatehi, International Management: A cross-cultural and functional perspective, Ch. 6, International Communication, Appendix 1, pp.224-226.
American Management Association, Aug. 95. Scaling the Wall of China,
pp.13-19.
Management Accounting, Aug. 96. A Management Accountants Guide,
pp.22-28.
Export Today, March 96, The Road to China, pp.30-41.
Export Today, June 96. China: Cause and Effect, pp.18-26.
Export Today, Feb. 96, China: Lessons Learned, pp.41-42.
Export Today, Apr. 96. Chinas Divided Market, pp.22-27.
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Cross Cultural Management

Export Today, Nov/Dec. 96, China: Of Sales Plans and Planned Sales,
pp.46-51.
http://1cweb2.loc.gov/frd/cs/chtoc.html.

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http://sunsite.au.ac.th/Neighbour/china/life.html.

54

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