Introduction

Though the People’s Republic of China has become increasingly open to the Western world in recent years, particularly for commerce, the Chinese have distinct and unique ways of doing business. Business and finance remain largely under governmental control, and approval is required from the authorities for any joint venture. Negotiations are marked by formal and polite behavior, but with an undercurrent of competitiveness and a certain disdain for outsiders.

Goal of Negotiations

Who you know is often more important than what you know in China, and having the right connections in both business and government can be crucial to how far your business can go. Chinese executives will rarely agree to meet with someone new without an introduction from a trusted source or an official, and once you are introduced, they will want to build a relationship of trust. Only then will they be prepared to consider your business proposal.

Attitude

The Chinese are rightly proud of their 5,000 years of cultural history, and tend to think of Westerners as honest and trusting but somewhat naïve, and lacking in patience and subtlety. Their own experience lets them take advantage of foreigners by exploiting weaknesses, playing you off against competitors, or even using deception. Negotiating tactics, many of them psychological, are often based on ancient traditions about the techniques of warfare, and negotiations are indeed seen as a type of battle between the sides, which the Chinese want to win on their own terms. Prices are often padded or inflated, decisions may be delayed as a way of pressuring the other side, or advantage taken of the foreigners’ fear of losing their investment in the country. It is important to let the Chinese know that you are prepared to walk away without an agreement if your bottom line is not met.

Personal Style

Business negotiations are seen as serious in China, and formal behavior is expected at meetings, as well as at many social occasions. Deference for superiors and elders is a cultural value; business suits are worn; handshakes begin and end all meetings; people are addressed by their title, or another honorific, and family name; an agenda is followed; and dialogue is carried on in a respectful and unemotional manner. If your personal style is more flamboyant than this, you will be reinforcing the stereotype that assumes Westerners to be loud and brash and not as mature as the Chinese. Some Chinese will be forgiving of this, accepting it as part of your culture; however, you will make a better impression if you are calm and soft-spoken.

Communication Style

Chinese people often communicate indirectly, and there are a number of reasons for this. Indirect answers to questions, particularly about China-wide economic issues, or anything to do with the Chinese government, may be used for the sake of self-protection, since passing on information that could be considered state secrets, or any implied criticism of the authorities, can lead to arrest or other difficulties. Secondly, some Chinese will tell their foreign guests what they assume you want to hear, and not necessarily the truth. Occasionally this is a ploy to flatter their counterparts, but it may simply be a way of being friendly by not contradicting. In addition, indirect communication is part of the negotiating strategy, a preference to not give away too much and to always finesse what is said, especially if it is negative. You should pay attention to body language and facial expressions to help read your counterparts’ true intentions, and try to find other sources who can doublecheck the veracity of information you have been given.

As already noted, Westerners are expected to be less subtle and more forthright, but it is always preferable to find a delicate and polite way to say "no" or to express any criticism.

While an increasing number of Chinese people have studied or done business abroad, and have learned good English, you should not assume that your Chinese counterparts can understand you. Even when they do know some English, an interpreter is usually employed. If you can arrange to spend time with the interpreter in advance to make sure he or she understands any specialized terminology and has a good idea of your goals, this will help minimize possible ambiguity.

Time Sensitivity

Doing things properly is far more important than how long it takes to get them done in China, which can often make both negotiations and implementation of a project somewhat frustrating to outsiders. In addition, the complex bureaucracy of the Chinese legal system will require a great deal of patience (and preferably friendly relations with upper-level governmental officials) until final approval can be given for your venture.

During meetings, your Chinese counterparts will wish to discuss many issues in great detail, and may take time out for internal consultation within their own team. Between meetings, they will also want time to hear the input of those who may be affected by your deal or want to influence the decision, and try to reach a group consensus. Be aware that they may also purposely delay decisions until the last minute, hoping to gain concessions because they know you are pressured for time when the end of your trip is imminent. 

Emotionalism

Chinese people are schooled from an early age to not show their feelings too openly, especially in situations where cool-headedness is required or where letting one’s emotions be known may prove advantageous for someone else—such as in business negotiations. This means they will often look straightfaced, or even bored, but you should not take this to be sign that they are disinterested in your proposal. For your own part, you should avoid excessive displays of emotion, loud voices, or theatrical gestures; rather, remain composed and polite at all times.

Be aware that the Chinese take saving face very seriously, and negative answers of any kind, whether turning down a dinner invitation or rejecting a business proposal, if handled indelicately, can cause a damaging loss of face that will need to be mended by profuse apologies and possibly compromises in your offer, if you are to continue negotiations.

Risk Taking

If a proposal made by the Chinese has some risk involved, they may try to hide this information from you or downplay its significance; but on the whole, Chinese do not like to take unnecessary risks in business. They are particularly interested in long-term success, and therefore may be prepared to agree to a deal which seems less promising or less certain in the short term if they are convinced that the prospects are good for later benefits. Long-term business relationships are also attractive to them, and the promise of further joint ventures may compensate for a certain level of risk-taking on a particular project.

Team Organization

Negotiations are largely seen as a conversation between team leaders, in which the subordinate members of the team play a secondary role, providing information or voicing an opinion only when asked to by their chief. The senior executive from the Chinese company (often one known as the deputy leader—the top position being largely honorary) will coordinate a process of reaching consensus within his or her organization. As noted, this can be quite time-consuming, as many people are involved in the discussions, ranging from senior management to those who will be responsible for implementation, and others whose jobs may be affected by the project. The advantage of this system is a high level of buy-in by members of the company once a decision is made, which will facilitate the project being carried out. 

Agreement-Building Process

The written form of a contract between your company and your Chinese counterparts will not necessarily be overly detailed, as Chinese managers prefer to leave the finer points to subordinates after a general agreement is reached. This can lead to some ambiguity and leave room for misunderstandings or different interpretations; pressuring for more specifics to be included in the initial negotiations, leading to written summaries or interim agreements, which can eventually be worked into the contract, is recommended. Have a lawyer examine the contract in both Chinese and English before you sign it.

Agreement Form

There are many stages that are legally required to conclude a business deal in China, each one requiring documentation that needs to be approved by governmental agencies. Firstly there should be a letter of intent from both parties: this is not a binding contract, but expresses the desire to work together. Following this, you will need to provide a project proposal giving the general outline of your venture and what you hope to achieve; then you will need to carry out feasibility studies and present their results. Only after this can you finalize a joint venture contract, which lays out the agreement in broad terms. Despite these bureaucratic requirements, there is little effective enforcement or legal process for litigation should the sides fail to meet their obligations. That being said, a deal that you have finalized and shaken hands on is morally binding, and the Chinese will usually do their best to fulfill it.

The assessments detailed in this article are intended for informational purposes only. They reflect typical attitudes within a given country or culture, and are not intended to describe any specific individual or business. World Trade Press is not responsible for any action taken on the basis of the information contained herein.

World Trade Press would like to acknowledge the research of Jeswald W. Salacuse (“Ten Ways That Culture Affects Negotiating Style: Some Survey Results,” Negotiation Journal, July 1998, Plenum Publishing Corporation) as the basis, with modifications, for the assessment categories described in this article.