Avoiding Common Pitfalls during Negotiations in China

Western business people are flocking to the Far East. China has clearly become one of the most sought after places that offer a near endless source of potential market growth. For many westerners, the eastern part of the world is a place steeped in mystery and a culture, both alien and fascinating to our way of doing things.

China is a vast potential marketplace of over a billion plus potential. Millionaires spring up like weeds virtually overnight, while millions of peasants toil in the fields, still employing the same tools their ancestors used under the shadow of the Great Wall. It is a land that possesses a collective mentality; where ancestors are revered with honor. Its people continue to be powerfully influenced by the teachings of Confucius, Taoism and Mao. It is a nation which is both humbling and confusing to our western way of life.

The neophyte global negotiator must be prepared before they embark on their journey to this venerable land. Our way of thinking and how we perceive or do things in the west, simply will not serve us as well there. A negotiator must acquire a different mindset, if he is to succeed in business endeavours in this ancient country. Too many untrained westerners rush to talk about the sales price in China.

The first maxim to remember as you prepare to meet with your new associates, comes from one of our own ancient empires; ‘When in Rome-do as the Romans do.’ The first Golden Rule of the global negotiator is the ability to be adaptable; to understand that people of different cultures do and perceive things differently. We need to learn to play by their rules, when on their turf, it’s their rules which count, not ours.

Western business people are direct and competitive. We readily engage in direct confrontation and blunt communication. We are impatient to get on with the task and conclude a deal. In any boardroom we bring our own cultural and business milieu with us to another country, like excess baggage.

The world of the Far East has a vastly different mindset. China has a powerful collective mentality as opposed to our individualistic style. The collective view of the Chinese permeates their way of thinking and how they do things. They believe more in group goals, cooperation, harmony, relationship building, and face saving. This, combined with subtle ambiguous communication styles, are of far greater importance to the Chinese, than the importance we place on a contractual piece of paper. Even the word ‘negotiation’ is alien in Chinese culture. Its equivalency is far more subtle and indirect. Confrontation of any kind is considered dire and uncivil.

Building durable relationships in the western business world is a relatively new model and has only partially ingrained itself in our deal making conceptualisation. In China, building relationships is critical and must be seen as absolutely essential. It is the cornerstone of how they do business because they view any potential relationship as being developed for the long term. This is not to say they do not attach importance to a signed contract, but rather that they tend to view the contract as being less sacrosanct and not necessarily as rigidly as we do.

There are several general observations that may be helpful, and they may have relevance to a successful discussion. These are generalities and may only be applicable in varying degrees, depending on the persons with whom you engage in your negotiations. Many Chinese negotiators have been educated in the West and may be more familiar with how we operate. Researching your counterparts prior to meeting with them, will be most beneficial in determining your approach.

Social interaction, formality, hierarchy, subtlety and respecting traditions have important relevance to the Chinese. Haste is not recommended, nor should it be expected. Patience and perseverance are highly regarded as virtues in Chinese society. Occasionally, their decision making process may be very slow, depending on how decisions are made in their respective organisations. Like we would do,in our own Western negotiation preparations, we should ascertain how decisions are made and by whom.

One important consideration, is that the initial meeting with your Chinese counterparts will entail the exchange of business cards. Unlike the westerners who barely glance at them, this process is important to the Chinese. Business cards define your ranking of what they perceive as your hierarchical structure. Their cards will note their educational qualifications and titles. They will carefully examine your business card, as the information provides the initial basis for personal interaction and relationship building.

Social engagements such as banquets or meals are another important feature in the relationship building process. A lot of business may be conducted during these repasts. The person who provides the invitation, foots the bill in China.

Generally speaking, the Chinese do not usually give or like to take ‘No‘ as an answer. ‘No’ is considered a socially offensive word. They often prefer to use ‘Maybe‘ which might mean ‘Maybe‘, ‘Yes‘, or ‘No‘. This can obviously be very confusing to a Westerner. The usual procedure is to ask their assistant or intermediary for an interpretation of exactly what they mean, when they respond with ‘Maybe‘.

Gift giving is another important component of Chinese society. It is part of the relationship building in establishing the goodwill process. These customs should be researched to understand what gifts are most appropriate, and when they are normally exchanged. In China, gift giving is almost an art. They often use money packets called ‘Ang Pow‘ so as to avoid any possibility of causing social offense by offering an inappropriate gift. Any gift which contains the color white is most inappropriate because the color white is a symbol of death and mourning. Similarly, a time piece, or clock also contains mortality connotations.

The Chinese also have a similar hierarchical structure which might be comparable to what is chauvinistically now described as ‘The Old Boy System‘. This is integral to relationship building. When a deal is concluded, relationships between the parties are expected to continue. Maintaining contact and exchanging greetings ,should be regularly maintained. This is done to facilitate communications and handle the inevitable ongoing glitches, which are likely to occur after the deal is done. Conflicts are easier to manage, if relationships are broadened through ongoing contact with your counterpart.

Face saving is another important feature peculiar to the Chinese. Western business people like to cover their derrières, while the Chinese are concerned about their reputation and integrity. It is a powerful insult to cause or allow your Chinese counterpart to lose face, or be humiliated in the presence of their peers.

The use of titles must be employed as a sign of respect and acknowledges the vertical hierarchical structure of Chinese society. There is a strict communication etiquette that needs to be correctly observed. The Chinese are traditionalists and many of their ancient rituals are still practised today. A global negotiator from the west, who understands this adherence to ancient rites and practices, will find it easier to negotiate.

Conclusion

It is clear that a prospective neophyte negotiator who is soon to embark on a negotiation with the Chinese, must do their homework before they engage in discussions with their Chinese counterparts. Rushing into a negotiation in any foreign country or culture,without doing so, can quickly become disastrous. Ignorance in this circumstance is not ‘bliss‘, it’s just foolish.