Negotiating with the Chinese

Last updated on May 13th, 2019 at 02:36 pm

Within the borders of the United States we are engaged in intra-cultural negotiations. When we travel to other countries or entertain guests from other cultures, we are engaged in inter-cultural or cross-cultural negotiations.

The negotiations with parties abroad are exciting and intellectually challenging.

In preparation for a presentation to the Milwaukee Trade Association, I did extensive research on negotiating on the Pacific Rim, which included interviews with a number of local executives who have conducted business in the Far East.

The research identified five types of barriers to reaching an agreement. They are structural, strategic, psychological, institutional and cultural barriers.

I will only address the cultural barriers in this article.

The cultural barriers can be divided into five areas: differences in communication styles; societal norms; worldviews; beliefs about what creates value; and beliefs about who legitimately makes decisions.

Culture is defined as a set of shared and enduring meanings. A culture can be viewed as an onion, with many layers of important beliefs and values; which can have a stronger influence on behavior. It can also be clearly ordered, which means it has a more pronounced effect on behavior because members of the organization are sure of which values should prevail in cases of conflicting interests.

Culture is the social adhesive that binds people together and gives them an identity as a community.

The first step in negotiating an international transaction successfully is to develop appropriate responses to cultural attitudes and expectations. Even though more Chinese companies are hiring English-speaking managers and engineers, you should seriously consider bringing a member of your team that speaks Chinese. This one step can prevent an unintentional loss of face and provide for more accurate communications.

Saving face may be defined as the act of preserving one’s prestige or dignity. China has a strong face-saving element, and negotiations may end if one party is caused to lose face. In China, saving face is more important than most business dealings. China is a polychromic culture and conceives time as flexible.

This is a potential flashpoint, since American culture is monochromic. We tend to adhere to schedules more closely. In China, personal relationships take precedence over preset schedules, and schedules, even in the form of a signed contract, remain approximate. It usually takes more than three transactions to build the necessary level of trust with the Chinese.

American negotiations start with a contract and build to a relationship. This is called building up. The Chinese practice building down, in which they start with a relationship and build trust in order to reach an agreement. Here again, the approaches of the parties are in opposition to each other.

Friendship implies obligation in China, and the Chinese will expect some concessions. It is best to perform small favors for the Chinese so they can reciprocate in the future. Information exchange may be difficult at times, since the Chinese may withhold information to try to put you at a disadvantage. Their strategy is to keep you off balance and defensive. You should strategically manage the exchange of information, make your expectations clear and link the exchanges so you receive something of value for the information being shared.

At the foundation of Chinese negotiations is the promotion of "Li," a long-term relationship, and "Quanxi," the duty to relationships. The Chinese need to be comfortable and trust the people they are dealing with. Their position in the negotiation is reached in advance, so if an impasse is encountered, they will need to withdraw and reach a new consensus.

Like in Korea, Japan and Taiwan, consensus decision-making is a major part of the process. Again, this is the opposite to the American approach of empowerment of the team to make the deal. The consensus approach takes longer, and negotiators should plan to spend at least 50 percent more time negotiating with Pacific Rim negotiators. The final decision will be made at the upper level of the organization.

Here are some suggestions drawn from the interviews with southeastern Wisconsin business executives who have experience in negotiating in the Far East:

  • Research the culture of the country in which you will negotiate.
  • Conduct a number of briefings with your executives prior to beginning the negotiation.
  • Formulate a list of do’s and don’ts.
  • Select an experienced local agent to work with you.
  • Hire your own interpreter.
  • Invest the time to develop a personal relationship with your supplier.
  • Formalize your communications in writing and be clear in your requirements to avoid misunderstandings.
  • Show interest, not impatience. Take a deep breath before you respond. Remember you are in a long-term relationship.
  • Listen carefully and actively.
  • Control your emotions.

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