Most companies that do not have extensive experience negotiating in China tend to follow the same negotiation strategy as they would in their home country, mistakenly believing that applying a few Chinese customs to their set negotiation practices will sufurce.
Businessmen traveling to China to negotiate for the first time must do their homework; it is important to have a basic understanding of the Chinese culture, as 2,000 years of cultural developments have understandably shaped the Chinese mindset, thus influencing their approach to negotiation strategy.
The two major philosophical influences on Chinese culture are:
• Confucianism – this philosophy, founded by Confucius over 2,500 years ago, revolves around di‑ erent hierarchical relationships in society, emphasizing obedience, loyalty and benevolence as admirable qualities
• Taoism – Taoism emphasizes on harmony with nature and the universe. It revolves around opposites (yin and yang) and stresses finding the way between the two
Both philosophies are concerned with the means rather than the end, the process rather than the goal. This concept is often played out in Chinese negotiations, as the Chinese feel that back and forth haggling helps to create an ideal compromise.
Additionally, the current surrounding sociopolitical and economic environment in China continues to influence the negotiating style. Imperialistic exploitation of China has left an intrinsic wariness of foreigners, as well as a general cynicism towards the rule of law in general. At the same time, in China there exists a high degree of bureaucratic complexity, meaning decision making requires authorization at many levels often resulting in competing interests. Thus both current and historical developments in China have signi cant impacts on Chinese negotiating practices.
Pre-negotiation
• The long "getting to know you" stage
This stage in China can last much longer than foreign businesses are accustomed to. It can involve attending long, drawn-out expensive banquets, attending sporting events, home visits, and more, during which everything but business is discussed. Very often these events include rounds of heavy drinking.
It may be regarded as rude to turn down the offer of a drink, so one must be prepared to deal with the consequences of drinking large quantities of liquor. Those who are particularly averse to the consumption of alcohol may want to prepare a medical excuse to avoid drinking, as this is an acceptable reason not to drink. However, it is important that nondrinkers still participate in the myriad of toasts that will occur over the meal; it's perfectly acceptable to toast with a soft drink, glass of juice, or mineral water. Under Chinese culture this preliminary stage is essential. This arises largely from importance that Chinese attach to interpersonal harmony as well as their reliance on good faith rather than on tightly drafted deals when doing business.
• Not showing their cards until they've seen yours Chinese negotiators will often feign disinterest in foreign enterprises' offers, which can be disconcerting to foreign enterprises who assumed they were arriving in China to negotiate an imminent deal. The Chinese will often use silence as a negotiating tactic, which their Western counterparts will misinterpret as a breakdown in the negotiating process, thus making hasty concessions. Chinese enterprises will also often claim they are in negotiations with competing interested parties, further reinforcing the idea that your business is not as important to them as theirs is to you. All of this is enough to make many foreign businessmen either throw their hands up in frustration and walk away from the deal or reveal their bottom line too soon in hopes of pushing the deal through in a more timely fashion. It's essential that the foreign firm gathers as much information about the local company prior to arrival in China, so it can have as clear a picture as possible of what will motivate the other side.
Negotiation
• Chinese strategic use of time
Bargaining sessions are long, and changes are frequent. Chinese negotiators will also strive to control the pace and use of time in negotiations in several ways:
o They will often seemingly delay proposals until
the last available minute, forcing the foreign enterprise to make on-the-spot decisions or return home empty handed
o They will also delay making commitments and request last minute changes or concessions, putting the foreign negotiator in a difficult situationo The Chinese will also seemingly jump from topic to topic in negotiations, never arriving at any agreement on any one point, thus drawing out the negotiation process
This behavior by Chinese negotiators stems from a few different cultural factors. As mentioned above, the Chinese have a deep-seated distrust of foreigners and a fear of being taking advantage of. Lengthening the negotiation process and forcing foreigners to make on-the-spot decisions is one way they can be more sure they are getting a fair deal.
The foreign negotiator must be prepared to return home without having signed a contract, and more importantly, the home office must fully back the negotiator in this.
Exhibiting diligence and commitment will not go unnoticed by Chinese business, and will improve the chances of concluding a successful deal.
• Creative use of information
Chinese negotiators have often been accused of being dishonest in their presentation of information. They may refer to real or fictional regulations, policies, or budget limitations in order to extract concessions from the other side. They may misrepresent their capabilities or willingness to commit to a particular aspect of a deal, only revealing the true situation at a later date, much to the dismay of their foreign counterparts. To the Chinese, the creative use of information in negotiations is an acceptable strategy.
Foreign negotiators must be aware of this tendency, and be prepared to combat the tactic accordingly.
Should the Chinese apply pressure to negotiate quickly using local policies and regulations, foreign negotiators should likewise use the policies and regulations of their own company to counterbalance this pressure. Most importantly, the foreign negotiator should rely on an intermediary to clarify points of contention. It is foolish to assume that foreign negotiators will be able to identify every situation under which Chinese negotiators are misrepresenting information – a Chinese intermediary is much more apt and well suited for such a task.
• Referral of decision making to higher authorities Chinese negotiators will frequently reference a need to consult with their superiors on important decisions.
This requires frequent breaks from the negotiating process so that the negotiator can confer with his or her superior, and maintain their input. This can cause foreign negotiators to feel discomfort, as they typically operate on the assumption that time is money and frequently misinterpret the Chinese breaks as signs of confusion or insincerity.
Furthermore, the Chinese social system itself is set up as a complex bureaucracy – even something as simple as purchasing a television in a department store requires interaction with a minimum of three different employees with different functions. Hence, many Chinese are risk averse. They frequently confer with superiors so that they can remain under the radar and avoid making decisions that later might leave them vulnerable to criticism.
Foreign negotiators should accordingly plan for negotiations with frequent breaks to give their Chinese counterparts the time necessary to make such consultations. Foreign negotiators can likewise use this tactic to their advantage, claiming a need to consult with superiors when they are unwilling to immediately make concessions.
It should also be noted that it is important that the foreign country send a negotiator of the appropriate status within the company. Sending a negotiator that is deemed to be inexperienced or of a low position is seen as an insult by the Chinese, and the deal may be doomed before negotiations even start. Eventually there may be a need for higher level members of each organization to meet. However, top-level Chinese executives will not be prepared to bargain, and will not be persuaded. It's simply not their role. As mentioned above, they are there to consult with lower-level negotiators, who in turn play the role of bargainer.
Post-negotiation
Changing elements of the contract that have already been agreed upon Once negotiations are concluded, Western negotiators may mistakenly believe that a deal has been arrived upon. They are then frustrated and confused by a sudden and unexpected request by the Chinese side to make a change in the contract regarding an issue that had already been discussed in depth and agreed upon. It is also possible that the Chinese will make no indication that they want to make a change, and will present a contract that is ostensibly the same as what had been discussed in negotiations, but in fact represents a changed agreement. Though at times infuriating, the foreign negotiator must expect such requests, and be prepared.
Foreign negotiators must be prepared to re-negotiate after deals have been arrived upon. However, it is also important for the foreign negotiator to understand that it is better to walk away from the business than to carry it out under unfavorable terms. Such a stance can result in a reputation of tenacity and persistence for the foreign negotiator that is valued by Chinese. The foreign negotiator must keep sight of their bottom line on core issues of the contract and be prepared to refuse to budge beyond that bottom line.
