Good negotiating skills are necessary when making deals in international trade. It allows you to get the best terms. Sourcing from China is popular. However, Western and Chinese negotiating styles differ substantially. Analyzing such differences and thorough preparation before the business meeting will work to your advantage. How to be successful at negotiating with Chinese business partners?
What are business negotiations?
Negotiations are the process of reaching an agreement between the parties and finding the most favorable solution to the conflict of interest.
One of the most common types of negotiations is business negotiations, commercial negotiations, for example, in the case of commercial agreements. The buyer tries to negotiate the best conditions and price, and the seller wants to avoid losses and get the best financial result or terms of execution.
The basis of negotiations is maintaining a similar position by both parties; if one is stronger, it is not a negotiation but a forcing agreement.
Negotiating with Chinese Business Partners – Cultural Differences
The fact that there are some cultural differences between China and Western countries is not surprising. Nevertheless, only some know how much these differences influence business culture. Some of the most significant differences in the context of trade cooperation are:
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,” “we will see,” or “let’s get back to this issue later” are often, in fact, refusals.
Differences in understanding the role of individual employees within the company
Chinese society has retained a much stronger concept of hierarchy than the West. The position of a superior is much higher in Chinese companies, and the employees cannot usually question their decisions. Therefore, choosing representatives of the same status and age is important, depending on the Chinese side’s representatives.
China vs. West – 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”) that can last a lifetime. Guanxi helps to navigate smoothly in the business environment and benefits from support within the network. It 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 must know the why. Most Chinese business people aim 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 makes convincing the other party to change terms easier since they feel they should feel indebted. It is related to yet another aspect of Chinese-style negotiations: the spoken word has an equal or even higher value than the written one. Given that, remember that any declarations, even spoken outside the company’s headquarters, might be considered binding by the Chinese.
One of the characteristics of negotiations with the Chinese 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 business people 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.
Exchanging Business Cards and Gifts
The business card exchange is an essential ritual in Chinese business culture, so preparing a sufficient number of business cards before leaving for the negotiations is a good idea. Putting Chinese text on the back of your business card is also good practice.
How to receive a business card in China?
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 or doodle!
Exchanging gifts during a business meeting in China
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. Use gold, red, pink, or silver wrapping paper and wrap it in China.
Give the gift to the head of the negotiating team. It is to be expected that they will refuse the gift three times. The process of exchanging gifts should not be photographed.
What gifts should be avoided in China?
When going on a business meeting with a Chinese business partner, avoid gifts such as:
- sharp objects
- products packed in sets of four.
Such gifts express bad wishes or indicate parting and, as such, should be avoided.
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 fail to get what you want. It is thus essential to prepare for negotiations with the Chinese well in advance. Here is some advice:
Negotiation preparations should be made ahead of the business trip. It is a good idea to request a draft agreement to be sent in advance. The course of the negotiation meeting should be pre-planned to a large extent.
Negotiation team in China
We advise sending a negotiation team that includes an interpreter, scribe, and observer for the best results. The members should coordinate their abilities and strive for the best results discussed in advance.
You should check who will be part of the Chinese side and match the ages and positions of key representatives in your negotiating team. The hierarchy should be mirrored as well.
Negotiation site in China
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 customs and regulations.
Knowledge is power
Learn as much as possible about your potential business partner and the product you intend to purchase. Otherwise, you might appear incompetent and lose the battle before it starts. Knowing the requirements that apply to particular products in your target market is essential. A well-prepared importer would discuss details related to the production process rather than ask about basics such as what MOQ is.
How to make sure the negotiations pay off?
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 if you sell to the EU. It is also a good idea to ask your contractor to show you their Business License.
Tips for Successful Negotiation in China
If you want to build long-term business relationships with your Chinese business partners and successfully negotiate the terms of transactions, you should visit China. It is because most business people from the region value face-to-face interactions. Even though many issues can be discussed over the phone, via video calls, or through emails, it might not be enough for larger orders.
These are tips useful when conducting negotiations with the Chinese:
How to dress for a business meeting in China?
Like in most parts of the world, there is strict business attire in China. It consists of a dark-colored suit for men and a suit or a modest dress for women.
Start of negotiations
First, the negotiation team enters the negotiating room according to the hierarchy. The head of the delegation enters first and makes the welcome speech opening the negotiations.
Negotiate with decision-makers
It is best to negotiate with decision-makers and those high up in the company hierarchy. You can then be sure you will not be dismissed with a vague answer.
What can be negotiated?
The most frequently discussed issues during trade negotiations are:
- range of products/services
- number of products/scope of services
- form and method of payment
- date of payment
- frequency and timing of deliveries
- guarantees, complaints
- maintenance and other services
How to negotiate the price with a Chinese?
Price is not the most pressing matter to negotiate. Chinese businessmen would not reduce the price on the first transaction 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.
How to conduct successful negotiations in China?
Chinese people value patience and persistence, so bear that in mind while you get frustrated with the lengthy negotiation process. In the initial stages, the Chinese avoid issues important from the buyer’s perspective (such as detailed terms of the contract). If these issues are raised by the Chinese side, and especially by the head of the delegation, it is a sign that they are ready to discuss them.
When are the negotiations concluded?
The Chinese-style negotiations do not end when you sign the commercial contract. It is only the beginning, showing that the talks are taken seriously.
There is no one specific moment when negotiations with Chinese business partners end. As a result, they often try to change its content when it seems that everything is ready, so be prepared.
Post-negotiation banquet in China – how to behave?
In China, it is common to hold a dinner banquet after the negotiation, usually in a high-class restaurant. The Chinese team observes the foreign delegation during the banquet, so it is worth remembering a few rules:
- Business is not discussed at the dining table.
- The host signals to start the meal by making a welcome toast and serving the guest of honor’s first plate.
- There is more food on the table than the people at it can consume to create an impression of abundance.
- You should try each dish, serving yourself from the serving platters using shared cutlery. Usually, only soups are served to each guest separately.
- Do not empty the plate or platters completely, as it means that there were not enough dishes.
- Compliment the food. The Chinese express tasty food by making sounds during eating.
- Heavy drinking is expected and accepted during Chinese dinners. Toasts are frequent and play a key role in building relationships. Non-drinkers should prepare a good explanation in advance.
Negotiating with Chinese Business Partners – What Should You Avoid?
Do not point out mistakes
Be careful not to put your interlocutors at risk of losing their face. Reputation (mianzi 面子, literally “face”) is extremely important 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. Therefore:
- do not openly criticize the Chinese in front of others
- do not treat the Chinese disregarding their socials status
- do not make fun of the Chinese in their presence.
Keep your distance (physical and emotional)
Unnecessary physical contact, irony, and displays of intense 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. Invading the other person’s private space is perceived very negatively, as is showing strong emotions.
Do not be impatient
When conducting negotiations in China, you should read the room and not rush. It is important to remain calm, optimistic, and think straight. Chinese interlocutors may ask you the same questions over and over again, testing your patience.
Avoid certain topics
It is recommended not to raise sensitive topics, such as religion and politics, before, during, or after the negotiations.
Do not make a down payment too soon
Making a down payment before negotiating all the terms is not advisable.
To sum up, as face-to-face interactions and interpersonal relationships are crucial aspects of Chinese business culture, preparing well for negotiations is the key to success. You should understand how the Chinese negotiate, use it to your advantage and stay patient.
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