The Research and Development Bulletin



Negotiating the Chinese way
By Andrew M. Williamson, Visiting Tutor, Business Sch...
Volume 5 Number 2 June 2007



is agreed, such as, for the official 'signing          remind you of any damage done to Chi...
The Research and Development Bulletin



competitors, either to imply you are less           to. They may quote (allegedly...
Volume 5 Number 2 June 2007



Dos and don’ts

When negotiating with the Chinese, it is strongly recommend that you ALWAYS...
The Research and Development Bulletin



When negotiating with the Chinese,                   deal with a competitor. The ...
Volume 5 Number 2 June 2007



by the Chinese by drawing them into a                 x  “Appeal to a higher-level decision...
The Research and Development Bulletin



Day 2 - Wednesday                                       have some command of Engl...
Volume 5 Number 2 June 2007



there would be no contest (i.e. assuming that            request for a substantial bribe. L...
The Research and Development Bulletin



doing business with the Chinese. The
Research and Development Bulletin 3(2),
Norw...
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Negotiating the Chinese way

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Negotiating the Chinese way

  1. 1. The Research and Development Bulletin Negotiating the Chinese way By Andrew M. Williamson, Visiting Tutor, Business School, City College Norwich Introduction x Exploit your and their weaknesses This article outlines the protocol and x Exploit your remorse suggests suitable tactics for business x Trip you up negotiations with the Chinese, the correct x Embarrass you observance of which should improve the x Play you off against your competitors chances of securing a successful outcome. A basic knowledge and understanding of x Approach you via a third party general negotiating techniques has been x Pretend to be annoyed with you assumed; thus what follows concentrates x Go over old ground with you purely on the aspects peculiar to China. This x Quote their law at you article tells it how it is, 'warts and all', since to x Manage your expectations. do otherwise would be to send the foreigner to negotiate with the Chinese like Daniel into The extent and manner to which any tactic or the lion’s den without any hope of survival. response is used may depend on whether Consequently, some readers may mis- the negotiations are unilateral (i.e. where interpret some of the remarks as being only one party is trying to buy or sell) or unkind towards the Chinese, when indeed bilateral (i.e. when both parties are interested the intention is the opposite, for the following in buying and selling or working in reasons: partnership). In the latter case, negotiations are more likely to be conducted as between x To pretend that anyone does not employ equals in a symmetrical manner (i.e. with as psychological tactics during business much give as take). negotiations in order to gain advantage would be naïve Responding to Chinese negotiating x What we in the West might consider to be tactics improper behaviour is not necessarily so Most of the negotiating tactics that the in China Chinese might employ may involve miànzi x Causing offence, or 'loss of face' is (‘face’), as described in Williamson (2006) unbecoming of a Confucian 'Superior and should therefore be countered by playing Man' (i.e. Chinese gentleman) the Chinese at their own game and not rising x The Chinese are not alone in this world in to the bait. For these reasons the following being inveterate hagglers for whom guidelines are suggested. outsiders are fair game in their efforts to preserve their collective 'face' and When the Chinese try to control the advance their collective good. arrangements Thus, this is an attempt to strike a balance Traditionally, the Chinese prefer to conduct between understanding why the Chinese and host negotiations with foreigners in negotiate in a certain way, without being China, in an attempt to cast them in a judgemental; and knowing how to respond to supplicatory role and thereby make them feel them, without causing offence. The protocols subservient. Besides costing the foreigners and techniques described below are time and money, the Chinese can play for illustrated with a few examples, then time; however, being physically close to the illustrated by a comprehensive case study. real decision makers with whom the Chinese negotiators will necessarily have to consult may speed up the process. This is because it Chinese negotiating tactics is neither usual nor the done thing for the Chinese negotiators may try to: former to attend detailed discussions; but x Control the arrangements rather appear only at the very end, when all The Research Centre, City College Norwich 43
  2. 2. Volume 5 Number 2 June 2007 is agreed, such as, for the official 'signing remind you of any damage done to China by ceremony'. They may quibble over minor your country, hoping to persuade you to details in the initial stages and then cram all ‘make amends’ by conceding terms that you the important points into the final stages, might otherwise not accept, in order to save delay proceedings and/or take time out, the ‘face’ of your country. In response refuse ostensibly to confer in private, or never leave to discuss, and disassociate yourself from you alone. By doing this they may hope to: such issues showing that you are impervious coerce you into compromising (out of sheer to such tactics and insist on ‘sticking to the desperation to reach some form of point’. agreement before returning home, rather than none at all), test your bottom line under When the Chinese try to trip you up pressure, or, make you think that you have The Chinese are inveterate note-takers and upset them, and thereby force you to reveal may quote back at you something you and/or your bottom-line concessions in an attempt to your colleague(s) once said and/or agreed, save your 'face'. In response you should play on and/or off the record, in- and/or outside the Chinese at their own game by insisting the negotiating room. They may also forget that some of the negotiations take place in something they said and/or agreed in similar your home country and tell the Chinese your circumstances. Again, this may persuade you time-table in advance, and stick to it, unless to concede to their terms, by honouring what you really have to reach agreement before you and/or your colleague(s) said and/or returning home. agreed on an earlier occasion, depending on whether it supports or conflicts with your When the Chinese try to exploit your and present stance, in order to save your ‘face’. their weaknesses In response play the Chinese at their own The Chinese may try to discover and exploit game by keeping your own detailed notes, in your ‘Achilles’ heel’ as well as reveal and order to ‘retaliate’ and never speak off the exploit their own. They may: play on your record or talk business outside the personal and corporate fear of failing to negotiating room. reach agreement; contrast China’s ‘poverty’ and lack of commercial experience with your When the Chinese try to embarrass you company’s wealth and experience, or simply The Chinese lay great emphasis on formal flatter you. In doing so they hope to persuade courtesy, as manifested in their observance you to concede terms that you would of ritual etiquette, from which business is not otherwise not accept, out of desperation exempt. They may use this to accuse you of and/or to save your ’face’ by reaching some breaking the ‘ground rules’ that you agreed form of agreement before returning home, at the outset; and/or unfriendly behavior. By rather than none at all. In this situation you doing this they fool you into thinking that you should resist taking the bait: if they see that have genuinely offended them, and thus, you are impervious to such tactics, they may persuade you to ‘make amends’ by desist, and if you really have to reach conceding terms that you would otherwise agreement before returning home, never let not accept. Remember that the accusations the Chinese know. are probably a ploy rather than genuine, keep your own detailed notes, in order to When the Chinese try to exploit your refute accusations of being devious and remorse resist taking the bait; If they see that you are The decline and fall of the Chinese Empire, impervious to such tactics, the Chinese may and thus of China’s pre-eminence in the desist. world, is in no small wise due to the incursions of and invasions by foreign When the Chinese try to play you off powers during the second half of the against your competitors nineteenth and first half of the twentieth Besides genuine competition, the Chinese centuries. The Chinese may choose to are not averse to ‘inventing’ fictitious 44 The Research Centre, City College Norwich
  3. 3. The Research and Development Bulletin competitors, either to imply you are less to. They may quote (allegedly) unpublished generous and/or co-operative, and/or that commercial codes or say that their superiors your products and/or services are more will only accept certain contractual terms attractive, than the competition, or, share (e.g. standard wordings). Thus, they may fool your competitors’ ‘secrets’ with you; and/or you into conceding terms that you would imply that they are not negotiating (any otherwise not accept. Instead retain a legal longer) with your competitors. They may then expert, obtain copies of the Chinese either persuade you to equal or better the commercial codes and play the Chinese at competition’s terms which you would their own game by telling them your otherwise not accept, out of sheer superiors may never accept certain desperation to reach some form of contractual terms. agreement before returning home, and/or test your bottom line under pressure. Or, they When the Chinese try to manage your may coax from you genuinely confidential expectations information, by lulling you into a false sense The Chinese may try to either raise or lower of security. Be prepared for this by knowing your expectations, persuade you to concede your competitors and play to your strengths terms that you would otherwise not accept, even by contrasting them with their through fear of losing an apparent ‘done- weaknesses, if your corporate culture so deal’ at the last moment, or, hide their allows. inability to deliver as much as you had originally hoped, and/or increase your When the Chinese try to approach you via gratitude for whatever crumbs eventually fall a third party from the Chinese table. The Chinese may try to use third parties to convey delicate messages or ‘test the waters’. By doing this they save their own ‘face’ if the intermediary fails, by denying (s)he was authorised to act on their behalf; you should likewise use a go-between in this situation. When the Chinese try to pretend to be annoyed with you In theory, the Chinese disapprove of outbursts of anger, however, in practice, they are not averse to affecting anger if it will help them get their own way and may accuse you of some trumped-up charge. This may fool you into thinking that you have genuinely offended them, and thus persuade you to ‘make amends’ by conceding terms in order to save your ‘face’. Remember that the accusations are probably a ploy rather than genuine and resist taking the bait. When the Chinese try to quote their law at you The Chinese may assume they are more familiar than you with their commercial law and exploit your ignorance of the same to justify not rejecting anything they do not want The Research Centre, City College Norwich 45
  4. 4. Volume 5 Number 2 June 2007 Dos and don’ts When negotiating with the Chinese, it is strongly recommend that you ALWAYS: Prepare beforehand Be prepared for much back-tracking, repetition, ambiguity and inevitable misunderstandings Remember that the final decision(s) may Take detailed notes be made by persons not at the meeting(s) Inflate your price Be able to walk away from the table Play to the Chinese strengths Know where the exits are Look for opportunities to empathise with Control your emotions the Chinese Display long-term commitment to China Check your ego at the door Go over every detail of the contract Be careful what you say to the media When negotiating with the Chinese, it is strongly recommend that you NEVER: Try to resolve problems individually Assume there is such a thing as ‘China plc’ Concede too easily Speak off the record Hesitate to cut your losses Lose your temper Reject a Chinese position out of hand Lose your patience Assume that the Chinese may make Embarrass the Chinese decisions for economic reasons alone Gloat at a successful agreement When negotiating with the Chinese, When negotiating with the Chinese, ALWAYS prepare beforehand ALWAYS inflate your price Ensure that you gain immediate access to Without being wholly out of line with the the key Chinese negotiators, to try to help competition, try to inflate your price slightly them devise language acceptable to their and then give away a lesser amount (say decision makers. Otherwise you may 15% and 10%, respectively), so that both you subsequently need to be referred to higher- and the Chinese ‘win’. Otherwise, the level officials, who may disregard any Chinese may assume that your quote is agreements you have already reached, and flexible and consequently, continue to haggle oblige you to start again from scratch. Even if until they secure some concession. Such you gain immediate access to the key concession may also give ‘face’ to the key Chinese negotiators, any agreements you Chinese negotiators by allowing them to reach with them may still need to be report some good news to their superiors, reviewed and ratified by their superiors. who, in turn, may be more kindly disposed to ratifying any agreements you reach. 46 The Research Centre, City College Norwich
  5. 5. The Research and Development Bulletin When negotiating with the Chinese, deal with a competitor. The Chinese may ALWAYS play to the Chinese strengths leave you a way out, however, they may not Your arguments should give ‘face’ to the necessarily want you to take it. You should Chinese as the Chinese may remember, leave the Chinese an exit as a way of their resent and retaliate against your taking saving ‘face’, a sign of your trust and, advantage of their weaknesses. Always look consequently, a potential means of building to empathise by being prepared to talk good will. If they take it, the sooner you find around a subject rather than address it out the better. Leaving yourself an exit may directly. Some Chinese may still consider it be more tricky, because unless they have left good manners to take an indirect approach, one for you already they may misinterpret it although others may be less sensitive and as a lack of commitment on your part. more direct. Never express, or allow the Chinese to sense any doubts that you may When negotiating with the Chinese, have about the ultimate feasibility of the ALWAYS control your emotions and object of your negotiations, the Chinese may check your ego misinterpret your hesitancy as insincerity. The Chinese are not only conditioned to control their own emotions but are also When negotiating with the Chinese, reputedly able to read your emotions, which ALWAYS go over every detail of the may put you at a disadvantage in the ‘poker contract game’ of business negotiations. The Chinese Ensure that you discuss all the issues, taking do not publicise (i.e. leak) agreements until all the time necessary and allowed. they are signed, sealed and delivered, they Otherwise, the Chinese may not fully also dislike surprises and hate public understand the language nor, consequently, embarrassment. the terms and/or conditions of the contract, and/or may identify but consequently keep When negotiating with the Chinese, quiet about some ambiguity in the contract NEVER try to resolve problems that may subsequently benefit them and/or individually nor concede too easily disadvantage you. Be prepared for much Instead follow the Chinese example of, first repetition, ambiguity and inevitable listening to all the problems and only then misunderstandings, but avoid ‘pointing the deciding what concessions if any you are finger’ and remember that the person you prepared to give, always keeping a couple of rebuke today may be your Joint Venture (JV) concessions up your sleeve, in case you partner tomorrow! Always take detailed notes need to offer them to close the deal. The as the Chinese are prone to asking Chinese may not only be non-plussed by interminable and multiple questions all in one your zeal to please them, but also use it later long sentence, which you will find much to embarrass you and then prove difficult to easier to answer if it is transcribed and be persuaded to back-track on previous broken down into its component parts. concessions, even though they may try to do the same to you; use silence as a negotiating When negotiating with the Chinese, tool. Follow the Chinese example of not ALWAYS be able to walk away from the giving up anything without a fight however table unimportant to you, since you can use it to Never get yourself into a position where, the extract something from them, as they would Chinese sense that, you need to have an you. By conceding something unimportant agreement as they take advantage by easily, you may run the risk of convincing the exploiting your position and/or push you to Chinese that you do not value it and will lose the verge of aborting the negotiations as a its value as a bargaining chip. Never hesitate ploy for them to determine your true bottom to cut your losses as the Chinese may not be line, and/or pull out without their losing ‘face’, able to deliver what they promise. However, when what they may really be after is never reject a Chinese position out of hand, information to use as a weapon to strike a instead counter any preposterous proposition The Research Centre, City College Norwich 47
  6. 6. Volume 5 Number 2 June 2007 by the Chinese by drawing them into a x “Appeal to a higher-level decision-maker discussion and/or steering them in a more x Ask the right question; push the right constructive direction, since a rebuff may button cause the Chinese a loss of ‘face’. x Be “Mr. nice guy” x Show respect; be modest When negotiating with the Chinese, x Take risks NEVER assume that the Chinese may make decisions for economic reasons x Use your guanxi to go through the back alone door.” Profit is a relatively new motivator in China, (Seligman, 1997, pp.146-148) the Chinese have traditionally made decisions for political reasons, even if the The golden rule project goes ‘belly up’, the technology may When all else fails, try the three “Fs” - be: remain in China. Never over-estimate the Firm, Fair and above all Friendly. The ability of your Chinese negotiators to resolve Chinese may set greater store by building a the objections of their political rivals, nor, working relationship (‘guanxi’ – see under-estimate the ability of such rivals to Williamson (2005)) with you than crossing scupper the negotiations. There is no such every ’T’ and dotting every ‘I’ of an thing as a corporate China when it comes to agreement. For them, personal trust is more doing business, everyone is out for what important than paper-based contractual (s)he can get for themselves or their ‘guanxi’ terms. circle (Williamson, 2005). When negotiating with the Chinese, never speak off the record Case Study and control your emotions at all times. There Keep calm, even when someone asks you is no such thing in China as speaking off the for an exorbitant favour in exchange for a record, since: ‘anything you say may be promise that (s)he may not be able to deliver. taken down and later used in evidence against you’ when and however it befits Protagonists them. Always be polite, softly spoken and The four protagonists in this case study are gentle, although very occasionally, anger can a: be used to good effect between you and the x Foreign ‘businessman’ living in China (i.e. Chinese; playing them at their own game. me) The Chinese strongly disapprove of outbursts of anger, which they consider a sign of x Chinese Potential ‘Joint Venture (JV) weakness, following the teaching of partner’ known to me and with whom I Confucius that, come what may, the already enjoyed good and direct relations ‘Superior Man’ should never lose his temper, x Chinese ‘Intermediary’ unknown to me or which is a loss of ‘face’ but always exercise my UK head office (HO), but known to self-control. When negotiating with the the ‘JV partner’ Chinese, you need to be patient since joint x Foreign ‘third party’ not living in China ventures, even when all parties may appear known to the intermediary and my HO. willing, can take several years to negotiate. When complete, never gloat at the success Day 1 - Tuesday of an agreement as if you have ‘won’ then One Tuesday, I received, via the ‘third party’, the Chinese have ‘lost’, which will cause an unsolicited approach from the them a loss of ‘face’. intermediary, who offered to set up a deal with the potential ‘JV partner’. As it so Overcoming objections happened, I had already arranged a meeting Seligman (1997) suggests the following with the potential ‘JV partner’ early on the supplementary tactics for overcoming following Monday morning (Day 5). objections, where not already included above: 48 The Research Centre, City College Norwich
  7. 7. The Research and Development Bulletin Day 2 - Wednesday have some command of English. On the Wednesday, when I checked the x Advise him in Chinese on how best to ‘Intermediary’s’ credentials: negotiate with foreigners. Even if the ‘Intermediary’ did not know, the x The ‘Intermediary’ explained that he: interpreter might (through his work - Would be present at the scheduled exposing him to foreigners) and could, meeting with the potential ‘JV partner’, therefore, help save the ‘Intermediary’s’ whom he claimed to know well ‘face’ since there was a fair chance that I - Wished to help me better understand was unlikely to know Chinese well the potential ‘JV partner’s’ position so enough fully to understand what was that both parties might reach a mutually being said. beneficial agreement. x The potential ‘JV partner’ denied all Playing the ‘Intermediary’ at his own game knowledge of the ‘Intermediary’s’ role. (i.e. in order to ‘level the playing field’), I then also invited my Chinese bi-lingual personal assistant (PA), to attend in order to: Day 3 - Thursday On the Thursday morning, after consulting x Even up the numbers; which suggested my HO, I reluctantly agreed to meet the subtly to the ‘Intermediary’ that I knew the ‘Intermediary’ on the following morning basic ‘rules of the game’ and was, (Friday – Day 4), in order to: therefore, no ‘greenhorn’; x Placate the potential ‘JV partner’ just in x Advise me in English on how best to case the ‘Intermediary’ really were able to negotiate with the Chinese and thereby jeopardise the meeting help save my ‘face’, especially as the ‘Intermediary’ was unlikely to know x Save the ‘face’ of the ‘Intermediary’ by English well enough fully to understand not saying “no” (which might have shut what she was saying the door to further negotiation) x Monitor the performance of the x Please the ‘third party’ ‘Intermediary’s’ interpreter, since it was At the same time, I made it clear to the apparent from the outset that the ‘Intermediary’ that I would only agree to his interpreter might not have a good enough attending the scheduled meeting with the command of English correctly to translate potential ‘JV partner’ if the latter also agreed, my nuances. This would also keep in which, at the time, they had not. check the interpreter’s advice to the ‘Intermediary’ Day 4 - Friday x Demonstrate my seniority (I was Director On the Friday morning, the meeting took for China of the leading UK insurance place in my office. company) and re-enforce my ‘face’, True to Chinese negotiating tactics to try to since, had I not done so, the gain the upper hand, the ‘Intermediary’ ‘Intermediary’ might have concluded that brought along an interpreter, probably in I was not senior enough to warrant one order to: and, thus, not his equal. x Counter the twin disadvantages of being Proposal the guest and not on his own territory by The preliminaries over, the ‘Intermediary’ ‘upping the numbers’ with an ally. Most claimed that the potential ‘JV partner’ had such meetings are normally hosted by three pet major building projects. If I were to the Chinese and on their own territory, for finance just one, the potential ‘JV partner’ which reason he probably expected to be might consider agreeing to a joint venture outnumbered by ‘hostile’ people. were another company also to finance one; x Gain ‘thinking time’, whilst the the potential ‘JV partner’ would have to proceedings were being translated, since choose between me and that other company. most educated Chinese in his position Were I or that other company to finance two, The Research Centre, City College Norwich 49
  8. 8. Volume 5 Number 2 June 2007 there would be no contest (i.e. assuming that request for a substantial bribe. Later that the total value of both projects exceeded that afternoon, about 4 p.m., the potential ‘JV of the remaining one); were I or that other Partner’s’ secretary telephoned my PA to company to finance three, well then …! He cancel the meeting scheduled for early the was giving me first refusal, since, having following Monday morning (Day 5), pleading done his homework, he considered my a last-minute summons to a high-level company to be the ideal candidate for the governmental meeting. Such an excuse is potential ‘JV partner’. not uncommon and frequently genuine, which in this case, it was subsequently Response confirmed to be. On informing my HO, I was My reaction was politely to: told that the ‘Third Party’ had already Listen attentively, take copious notes and informed them that the ‘Intermediary’ had ask appropriate searching questions - in complained of my lack of co-operation; a order to dissemble my incredulity at the charge that the HO flatly denied. sheer scale and ‘cheek’ of the proposal with feigned interest as well as ensure the Happy ending ‘Intermediary’ saw that I accurately recorded Some two to three months later, I invited the the details of the proposal. potential ‘JV Partner’ to a banquet, which Explain modestly that I could not decide, but they accepted. Some 18 months later, I would have to refer to my HO immediately, happened to meet by chance a (in order to save my own ‘face’). Since the contemporary from school who, to cut a long Chinese have made an art of public story short, turned out to have been the demonstrations of modesty, prefer collective ‘Third Party’! After a brief conversation, the over individual decision making as a means ‘Third Party’ retracted his view of my of taking advantage of collective wisdom and performance; he had no idea of the do not like to make ‘off the cuff’ decisions, Intermediary’s proposal; which shocked him. the ‘Intermediary’ would recognise this ploy as typically Chinese and thus accept it with Footnote good grace. Even if I had conceded, there was no Warmly thank the Intermediary for the guarantee that the joint venture would have opportunity of ‘first refusal’ for such projects, been successful. True, chequebook in order to build the ‘Intermediary’s’ ‘face’ in negotiating has reputedly worked true Chinese style by expressions of flattery occasionally in the past, but the Chinese are and gratitude, albeit false, in front of others. reluctant to bite the hand that feeds it. In Promise to let him have an early answer, other words, while they can still dangle rather than say no, in order to save his own carrots and receive presents, why hand over ‘face’ and keep the door open. Since the the carrots? Chinese refuse politely in a number of ways, As a fellow Chinese academic once said to including lying, without exactly saying no as a me: why should the Chinese use their own means of saving ‘face’, avoiding shutting the money, of which he claimed that they had proverbial door to further re-negotiation and more than sufficient, while the West is leaving room for further manoeuvre, the prepared to hand theirs over by the ‘Intermediary’ would recognise this ploy as barrowful? typically Chinese and thus accept it with good grace. Further information www.minim.biz Outcome After the ‘Intermediary’ left, I immediately References reported to my HO, which agreed that I had Seligman, S.D. (1997). Decoding with the acted wholly appropriately; whilst my Chinese. Management Books 2000, UK. Chinese PA expressed her shock that what Williamson, A.M. (2005). Guanxi: the key to had just happened was undoubtedly a 50 The Research Centre, City College Norwich
  9. 9. The Research and Development Bulletin doing business with the Chinese. The Research and Development Bulletin 3(2), Norwich: The Research Centre, City College Norwich. Williamson, A.M. (2006). Miànzi, kèqi and xiào: insights into the Chinese business psyche. The Research and Development Bulletin 4(1), Norwich: The Research Centre, City College Norwich. The Research Centre, City College Norwich 51

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