Negotiating with Chinese Business Partners

Negotiating is an integral part of the cooperation between parties in international trade. It allows tailoring the terms of transactions to individual needs. However, Western and Chinese negotiating styles differ substantially. Analyzing such differences and thorough preparation before the meeting will work to your advantage. How to be successful at negotiating with Chinese business partners?

Negotiating with Chinese Business Partners – Cultural Differences

The fact that there are some cultural differences between China and Western countries is not surprising. Nevertheless, not everyone knows how much these differences influence business culture. Some of the most important dissimilarities in the context of trade cooperation are:

1. Differences in expressing opinions and emotions

It is not common for Chinese people to refuse directly or express a negative attitude towards an issue. In Western countries, on the other hand, most people prefer to express their views and emotions openly, which sometimes leads to misunderstandings. You should be aware that despite the friendly atmosphere of the negotiations, the outcome will not necessarily be positive. Moreover, phrases such as “perhaps” or “let’s get back to this issue later” are often disguised as refusals.

2. Differences in understanding the role of individual employees within the company

Chinese society has retained a much stronger concept of hierarchy than the Western one. The position of a superior is much higher in Chinese companies, and the employees cannot usually question their decisions. Therefore, it is important to choose representatives of the same position and age, depending on the Chinese side’s representatives.

3. Differences in social ties

Western individualism contrasts with Chinese collectivism. Many people in the US and Europe tend to separate professional and private life. However, the Chinese create a network of connections called guanxi (关系, which can also be translated as “relations”) for years. Guanxi helps to navigate smoothly in the business environment and benefits from support within the network. This factor influences the Chinese strategies for creating long-term business relations based on trust.

Chinese Negotiating Style

To understand the nature and style of Chinese negotiations, you have to know the why. For most Chinese businessmen, the aim is to establish a framework for long-term cooperation and seek mutual benefits, not just to come to an agreement on a single transaction. Chinese-style negotiations are thus an ongoing process rather than a single event on the meeting calendar. For the Chinese, the process itself is more important than the goal.

Chinese business partners want to build long-lasting interpersonal relationships rather than strict business ones. It is often not limited to meetings in the office but often extends to shared meals or sightseeing. Therefore, it is common that you will not get to the point during the first couple of meetings. This negotiating style requires adaptation and patience for the task-oriented Western businessmen driven by the “time is money” principle.

Guanxi and Negotiating with Chinese Business Partners

Because Chinese people want to build a guanxi network, business meetings are typically conducted in a friendly atmosphere. It might lull Western businessmen’s vigilance and make them agree to a change in terms, feeling indebted by the informality of meeting and kind words. It is related to yet another feature of Chinese-style negotiations: the spoken word has an equal or even higher value than the written one. Given that into account, keep in mind that any declarations, even spoken outside the company’s headquarters, might be considered binding by the Chinese.

One of the characteristics of negotiations with Chinese counterparties is the use of general concepts and referring to moral values. Going from the general to the specific and using vague, sometimes abstract slogans is a challenge for Western businessmen more accustomed to a fixed legal framework. In fact, it may not be clear until the very end of the negotiations what the outcome would be. You can find more information on Chinese business culture in one of our e-books.

Exchanging Business Cards and Gifts

The business card exchange is an essential ritual in Chinese business culture, so it is a good idea to prepare a sufficient number of business cards before leaving for the negotiations. It is also good practice to put Chinese text on the back of your business card. When it comes to receiving a business card, you should always do it using both hands and read the contents carefully. Never put it in your back trouser pocket!

Exchanging gifts is common when you meet a new business partner and after the deal is closed. It is in good taste to gift some office supplies or local souvenirs from your country.

However, it is unacceptable to gift Chinese items made in China, watches/clocks, umbrellas, candles, and products packed in sets of 4. Such gifts express bad wishes or indicate parting and, as such, should be avoided.

Business cards in China
Make sure to read the information on the business card after you receive it.

How to Prepare for Negotiating with Chinese Business Partners?

Negotiations are one of the crucial stages in communication with a business partner. If you do not prepare well enough, you may not succeed in having your provisions met. It is thus crucial to prepare for negotiations with the Chinese side well in advance. Here is some advice:

  • Negotiation preparations should be made ahead of the business trip. It is a good idea, for example, to ask for a draft agreement to be sent in advance. The course of the negotiation meeting should be pre-planned to a large extent. You should check who will be part of the Chinese side and match the ages and positions of key representatives in your negotiating team.
  • We advise delegating several people to represent the company for the best results, including your interpreter, recorder, and observer. The members should coordinate their abilities and strive for the best results discussed in advance.
  • The setting is extremely important – the business environment is different in first-tier cities such as Beijing, Shanghai, Shenzhen, or Guangzhou and different in smaller cities or towns where the Chinese characteristics of negotiations are more prominent. In such a case, thoroughly research each region’s local background and regulations.
  • Learn as much as you can in advance about your potential business partner and the product you intend to purchase. Otherwise, you might appear incompetent and lose the battle before it actually starts. Knowing the requirements that apply to particular products in your target market is essential. A well-informed importer would discuss detailed issues related to the production process rather than ask about basic issues such as MOQ.
  • When communicating online, before making any binding decisions, make sure you will be provided with appropriate documentation, such as a copy of the CE declaration of conformity. It is also a good idea to ask your contractor to show you their Business License.

Successful Negotiations with the Chinese

If you want to build long-term business relationships with your Chinese business partners and successfully negotiate the terms of transactions, you will most probably need to visit China. It is because most businessmen from Far East countries value face-to-face communication. Even though many issues can be discussed over the phone, through videoconferences, or through emails, it might not be enough for larger orders.

Tips for Successful Negotiation in China

The following tips are useful in conducting effective negotiations with the Chinese:

  • Dress code – like in most parts of the world, there is strict business attire in China, which consists of a dark-colored suit for men and a suit or a conservative dress for women.
  • The Chinese-style negotiations do not end when you sign the trade contract. It is only the beginning, and it shows that the talks are taken seriously. There is no one specific moment when negotiations with Chinese business partners end. As a result, they often attempt to alter the contract’s content when it seems that everything is ready, so be prepared.
  • It is best to negotiate with decision-makers and those high up in the company hierarchy. You can then be sure that you will not be dismissed with a vague answer.
  • Price is not the most pressing matter to negotiate. Chinese businessmen are quite reluctant to reduce the price on the first transactions unless you make a large order. It is better to focus on the product’s functionality, quality, compliance, packaging, and delivery terms. The outcome may be better than the reduced price itself.
  • Chinese people value patience and persistence, so bear that in mind while you get frustrated with the lengthy negotiation process.

Negotiating with Chinese Business Partners – What Should You Avoid?

  • Be careful not to put your counterparty at risk of losing their face. Reputation (chin. mianzi 面子, literally “face”) is of extreme importance to the Chinese. Therefore, if you try too hard to prove them an inaccuracy or point out a mistake, they might feel that their good name has been compromised and may not be willing to cooperate further.
  • Unnecessary physical contact, irony, and displays of strong emotion are behaviors that will certainly not help you succeed in negotiations with the Chinese. It is best to remain composed regardless of the course of the conversation.
  • It is not advisable to make a down payment before negotiating the factors.

To sum up, as face-to-face contact and interpersonal relationships are crucial aspects of Chinese business culture, preparing well for negotiations might be the key to success. You should understand the way the Chinese negotiate, use it to your advantage and stay patient.