A reader from British Columbia, Canada, recently recommended Harvard Business School’s website to me for information on China.  The site has a number of good articles on China, but I particularly liked  “Negotiating in China” [link no longer exists], co-written by John L. Graham, professor of international business at the UC-Irvine, and M. Mark Lam, CEO of Live365.com, an internet radio network.  Graham and Lam are also co-authors of the book, China Now: Doing Business in the World’s Most Dynamic Market, to be published on July 1, 2006, by McGraw Hill.

Though this China negotiations article was written in 2003, and though I am always saying that what was true in China a year ago is probably not true today, its culture is relatively immutable and this article’s advice on negotiating in China is still dead on.  The article stresses the need for westerners to know more than basic Chinese etiquette to negotiate successfully with the Chinese:

Indeed, our work with dozens of companies and thousands of American and Chinese executives over the past twenty years has demonstrated to us that a superficial obedience to the rules of etiquette gets you only so far. In fact, we have witnessed breakdowns between American and Chinese businesspeople time and time again. The root cause: a failure on the American side to understand the much broader context of Chinese culture and values, a problem that too often leaves Western negotiators both flummoxed and flailing.

All too often, Americans see Chinese negotiators as inefficient, indirect, and even dishonest, while the Chinese see American negotiators as aggressive, impersonal, and excitable. Such differences have deep cultural origins. Yet those who know how to navigate these differences can develop thriving, mutually profitable, and satisfying business relationships.

According to the article, westerners negotiating with the Chinese must always be mindful of the following eight important elements underpinning “the Chinese negotiation style:”

Guanxi (Personal Connections)
While Americans put a premium on networking, information, and institutions, the Chinese place a premium on individuals’ social capital within their group of friends, relatives, and close associates.

Zhongjian Ren (The Intermediary)
Business deals for Americans in China don’t have a chance without the zhongjian ren, the intermediary. In the United States, we tend to trust others until or unless we’re given reason not to. In China, suspicion and distrust characterize all meetings with strangers.

Shehui Dengji (Social Status)
American-style, “just call me Mary” casualness does not play well in a country where the Confucian values of obedience and deference to one’s superiors remain strong. The formality goes much deeper, however — unfathomably so, to many Westerners.

Renji Hexie (Interpersonal Harmony)
The Chinese sayings, “A man without a smile should not open a shop.” and “Sweet temper and friendliness produce money.” speak volumes about the importance of harmonious relations between business partners.

Zhengti Guannian (Holistic Thinking)
The Chinese think in terms of the whole while Americans think sequentially and individualistically, breaking up complex negotiation tasks into a series of smaller issues: price, quantity, warranty, delivery, and so forth. Chinese negotiators tend to talk about those issues all at once, skipping among them, and, from the Americans’ point of view, seemingly never settling anything.

Jiejian (Thrift)
China’s long history of economic and political instability has taught its people to save their money, a practice known as jiejian. The focus on savings results, in business negotiations, in a lot of bargaining over price — usually through haggling. Chinese negotiators will pad their offers with more room to maneuver than most Americans are used to, and they will make concessions on price with great reluctance and only after lengthy discussions.

Mianzi (“Face” or Social Capital)
In Chinese business culture, a person’s reputation and social standing rest on saving face. If Westerners cause the Chinese embarrassment or loss of composure, even unintentionally, it can be disastrous for business negotiations.

Chiku Nailao (Endurance, Relentlessness, or Eating Bitterness and Enduring Labor)
The Chinese are famous for their work ethic. But they take diligence one step further — to endurance. Where Americans place high value on talent as a key to success, the Chinese see chiku nailao as much more important and honorable.

Anyone who has done business in China can no doubt see where at least some of these elements played a role in their dealings.  If I am going to be negotiating a big deal in a foreign country, I try to bring along someone (preferably someone I know well) steeped in the local culture.  I find translators are good at telling me what was said, but the person who knows both the language and the culture can help me decide what to say next and why.  It is not so much that one cannot do business without knowing the intricacies of the culture, but knowing those intricacies definitely helps.

Bottom Line: The more you understand the Chinese negotiating style, the better equipped you will be to succeed in negotiating with them.  The more you know of Chinese culture, the better you will understand their negotiating techniques.

  • Certainly, cultural know-how are an important component of negotiating in the PRC, but I think it is also good to be mindful of the historical legacy of Westerners conducting business in China. The Chinese, from my experience, have an acute sense of the humiliation inflicted upon on them during the early 1900s, which only intensified during the 1960’s through the 1980’s. Professor Roderick Macfarquhar, a political scientist of Harvard University, would often argue that when negotiating with the Chinese, Westerners (particularly Americans) must be mindful of three things. First, China is a proud nation, which, over the course of the last two centuries, has lost a lot of its self-confidence. Second,the “Century of Humiliation,” as the Communists, call it is still uppermost in many Chinese minds. Third, it is important to treat the Chinese with respect, but not kowtow to China. Over the last 20 years there has been a tendency for those involved in academia and politics to bend over backwards to please China.
    Thank you for your insightful post! We could use your perspective on http://www.chinacubed.com

  • I agree with Mr. Yasuda’s very thoughtful additional pointers. In particular, I agree we must not kowtow. I am highlighting how understanding Chinese culture and negotiating tactics can assist non-Chinese in achieving their goals in China.

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