TABLE OF CONTENTS

Introduction......................................................................................................................................2

ASPECT OF NEGOTIATION........................................................................................................2

STRATEGIES OF NEGOTIATION...............................................................................................4

Attitudes and Styles.....................................................................................................................4

Pace of Negotiation......................................................................................................................5

Bargaining....................................................................................................................................5

Decision Making..........................................................................................................................6

10 THINGS TO REMEMBER WHEN GOING INTO NEGOTIATIONS IN CHINA:................7

REFERENCES................................................................................................................................9

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INTRODUCTION

With its booming economy and growing international consumer influence, the role of negotiation
in international business is more important than ever and negotiation skills appropriate for China
are in high-demand. Here are a few negotiation tips to help you successfully navigate the
negotiation process in China.

China is a vast, rapidly changing country bursting with economic opportunity for locals and
foreigners alike. Since market reforms began in 1979, real GDP growth has averaged 9%
annually. It’s no wonder that American entrepreneurs are traveling to China in droves to open
plants, hawk cell phones and cars, and create new partnerships – and launch broad-scale
international negotiations.

Negotiating in China is a lot like running a marathon without knowing where the finish line is.
Participants need endurance and perseverance to see the process through. Patience is key and you
can only train for it through actual experience.

Americans think of negotiation as a process where complex issues are broken down into smaller
ones that can be tackled in an orderly step-by-step manner. Once an agreement is reached, papers
are signed to seal the deal. Soon after, a business relationship per the agreed-upon conditions
begins.

ASPECT OF NEGOTIATION
Chinese negotiations, on the other hand, can give the impression that they go on and on in
circles, jumping from discussing price, for example, to talking about quantity but without ever
settling on anything. Add to this language and cultural barriers and they can become exhausting.

What special insights do outsiders need to prepare for international negotiations in China? Much
of what you know already about negotiation holds true, but four characteristics complicate
business negotiation in China:

A strong emphasis on relationships. Deals tend to depend heavily on the relationship between the
parties involved; social gatherings are common during the negotiation process.

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High commitment, loose contracts. Your new partner in China is likely to expect you to invest
significantly in the relationship, often without fixed terms, and to respond to his shifting needs.
Calls for flexibility can frustrate Westerners accustomed to ironclad contracts.

A long, slow deal-making process. The Chinese focus on building relationships rather than on
contracts tends to prolong the negotiation process. Westerners befriend their counterparts only
after making a deal, while the Chinese make a deal only when some level of friendship has been
reached.

Widespread opportunism. Despite the importance placed on relationships, negotiators in today’s

Although most Americans treat those they know differently than they treat strangers, Chinese
behavior towards insiders and outsiders tends to be more extreme than in the United States – and
therefore more important in negotiations in China than many Americans understand.
Relationship building in China is very different than in America.

A guiding principle in Chinese society is guanxi – personal relationship building with people
from whom one can expect (and who expect in return) special favors and services. Family ties
are paramount, but friends, fellow students, and neighbors can also join the inner circle. As a
foreigner, a savvy business negotiator can cultivate guanxi either by hiring people with close ties
to her counterpart or by developing her own relationships with key contacts

The Chinese often go to great lengths in relationship building to open doors for those within their
social network and trust them to a degree that would surprise many.

The value that Confucianism places on interpersonal obligations underlies this focus on
relationships. Your Chinese counterparts will trust you to fulfill your end of a deal, not because
you signed a binding contract, but because guanxi obligates you to do so.

Reciprocity is an important feature of negotiations around the world but particularly so in the
People’s Republic of China. Build relationships but expect to incur obligations as well. Make
sure to build relationships with your counterparts in constructive ways that both honor her need
for a reciprocal understanding of the business relationship while also creating value and securing
the most optimal negotiated agreement for your organization possible.
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Don’t depend on only contracts, which serve more to establish a relationship than to specify all
future contingencies. Communication in international business is important but even more so
when the negotiated agreement is vague on the specifics.

STRATEGIES OF NEGOTIATION
- Negotiation Strategy 1: Take your time.

Lasting deals aren’t negotiated in days or weeks but in months and years.

- Negotiation Strategy 2: Make high-level contacts.

To find negotiators who are flexible and practical, reach out to those in positions of authority
whenever possible.

- Negotiation Strategy 3: Avoid the gold rush mentality.

Make sure you’re committing to a deal that truly will benefit you and your organization.

Finally, continue to develop your best alternative to a negotiated agreement or BATNA. The
only surefire antidote to hardball negotiation tactics is a strong, secure outside option away from
the bargaining table.

Before you come into a Chinese negotiation meeting, it is crucial you leave your expectations of
how the process should go at the door.

Attitudes and Styles – In China, the primary approach to negotiating is to employ distributive
and contingency bargaining. While the buyer is in a superior position, both sides in a business
deal

own the responsibility to reach agreement. They expect long-term commitments from their
business partners and will focus mostly on long-term benefits. Although the primary negotiation
style is competitive the Chinese nevertheless value long-term relationships. Chinese negotiators
may at times appear highly competitive or outright adversarial, bargaining for seemingly small

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gains. However, even when negotiating in a fairly direct and aggressive fashion, they ultimately

maintain a long-term perspective and remain willing to compromise for the sake of the
relationship.

Sharing of Information – Chinese negotiators are willing to spend considerable time, sometimes

many weeks or even months, gathering information and discussing various details before the
bargaining stage of a negotiation can begin. Information is rarely shared freely, since the Chinese
believe that privileged information creates bargaining advantages.

Be careful with what you are willing to share yourself and protect your intellectual property. In

China, people may consider all information available to them a property they are entitled to use
to their best interest.

Keep in mind that humility is a virtue in Chinese business culture.

Pace of Negotiation – Expect negotiations to be slow and protracted. Relationship building,

The Chinese generally employ a polychromic work style. They are used to pursuing multiple
actions and goals in parallel. When negotiating, they often take a holistic approach and may
jump back and forth between topics rather than addressing them in sequential order. In multi-
item negotiations, people may bargain and haggle over several aspects in parallel. It is not
unusual for them to re-open a discussion over items that had already been agreed upon. In
addition, they may take phone calls or interrupt meetings at critical points in a negotiation. While
they may be doing some of this on purpose in order to confuse the other side, there are usually no
bad intentions. Negotiators from

strongly monochronic cultures, such as Germany, the United Kingdom, or the United States, may

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nonetheless find this style highly confusing and irritating. In any case, do not show irritation or
anger when encountering this behavior. Instead, keep track of the bargaining progress at all
times, often emphasizing areas where agreement already exists.

If your counterparts appear to be stalling the negotiation, assess carefully whether their slowing
down the process indicates that they are evaluating alternatives or that they are not interested in
doing business with you. While such behavior could represent attempts to create time pressure in
order to obtain concessions, the slow decision process in the country is far more likely causing
the lack of progress. People from fast-paced cultures often underestimate how much time this
takes and make the mistake of trying to ‘speed things up’, which is usually counterproductive.
Again, patience and persistence are vitally important.

Bargaining – Most Chinese businesspeople are shrewd negotiators who should not be
underestimated.

The bargaining stage of a negotiation can be extensive. Prices may move by 40 percent or more
between initial offers and final agreement. Leave yourself sufficient room for concessions at
many different levels and prepare several alternative options. This gives the Chinese negotiators
room to refuse aspects of your proposal while preserving face. Ask the other side to reciprocate
if you make concessions. It is not advisable to make significant early concessions since your
counterparts will expect further compromises as the bargaining continues. You can use the fact
that aspects can be revisited to your advantage, for instance by offering further concessions
under the condition that the Chinese side reciprocate in areas that had already been agreed upon.

Deceptive techniques are frequently employed, and Chinese negotiators may expect you to use
some of them as well. This includes tactics such as telling lies and sending fake non-verbal
messages, pretending to be disinterested in the whole deal or in single concessions,
misrepresenting an item’s value, or making false demands and concessions. Lies will be difficult
to detect. It is advisable to verify all information received from the local side through other
channels. Similarly, they treat ‘outside’ information with caution. Do not take such tactics
personally and realize that overt attempts to lie at or bluff your counterparts could backfire and
might damage business relationships. Since negotiation teams must be well aligned and always
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have to preserve face, people rarely use ‘good cop, bad cop.’ It can sometimes be beneficial to
use these tactics in your own negotiation approach. Carefully orchestrated, they may allow you
to obtain valuable concessions without damaging the overall relationship. However, it could be
devastating if the other side recognized this as a tactic, and any ‘bad cop’ member of your team
also needs to be excluded from future negotiation rounds. The Chinese are not likely to use the
‘limited authority’ technique because groups rather than individuals normally make decisions. Be
cautious when using the techniques of false demands or false concessions. Since you must avoid
causing loss of face, any overt att empts to bluff your counterparts could also back fire
Negotiators may use pressure techniques that include keeping silent, making final or expiring of

Decision Making – Organizations are usually very hierarchical. However, while you may
sometimes encounter a western-style entrepreneur as the sole decision maker within their
company, decision making is normally a consensus-oriented group process in China. This can be
confusing for Westerners looking to identify the ‘key decision maker’ in an organization, while
in reality such a role may not exist at all. Decisions are often made through a process involving
many stakeholders who establish consensus through a series of deliberations and internal politics
that outsiders have very limited insight into. This process can take a long time and requires
patience. Influencing the decision making requires understanding the Chinese side’s intentions
and building strong relationships with as many influence stakeholders as you possibly can. The
role of the senior leaders is to orchestrate the process, not to make decisions themselves.

10 THINGS TO REMEMBER WHEN GOING INTO NEGOTIATIONS IN CHINA:

1.) While learning Chinese may not be practical, knowing a few key polite phrases can give a
good impression to your potential partner. Make an effort to learn some basic phrases before you
hop on the plane to your business meeting.

2.) Make sure you hire a seasoned translator and make sure the person is firmly on your side. A
good translator is one that puts an effort into placing your words in a culturally appropriate
context, not just passing along what you say.

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3.) Don’t be alarmed if your first few meetings accomplish very little. The Chinese like to get to
know who they are dealing with before jumping into business discussions. These seemingly
fruitless meetings are their way of building a relationship and establishing trust with you and
your company.

4.) Once the negotiation game is on, it is not uncommon for your Chinese counterparts to present
the same demand over and over and in many different ways to wear their opponent down. These
demands may seem ridiculous and illogical. However, they are there to get you to take your eyes
off the ball so that when it comes down to real issues you give in quickly without putting up
much of a fight.

5.) You may spend hours negotiating and coming to an agreement only to then have the person
you are negotiating with call his boss. Then the boss enters the scene, objects to the agreed-upon
terms, and the whole process begins again.

6.) Remember, negotiations are never over. You may fly your president across the ocean, sign
the deal, shake hands, and think it is all done, only to find out the next day they no longer agree
to some aspect of the deal. Issues can arise and renegotiations can and often do take place at any
given point in the process.

7.) Take all promises made during negotiations with a grain of salt. Don’t factor them into the
negotiation process. The people you’re talking to may say they have government, sales, or
supplier connections when in fact they don’t. Such exaggerations are part of doing business in
China. Unless they are followed by concrete demonstration, those who take them seriously do so
at their own peril.

8.) Have your own set of demands you can insist on and then drop as a show of compromise.
While these demands may not be important to you, they give your potential partner the
impression that you have taken 9.) It is important to appear confident. Eagerness to close a deal
may embolden the Chinese party by making them think they hold all the bargaining chips. Take
your time on decisions.

10.) Make sure you have enough time within your visit to proceed in a leisurely manner. Get
some rest before you jump into meetings, especially if you are suffering from jet lag. It is hard

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enough to focus on the issue at hand in slow, protracted business negotiations. It is near
impossible when you are tired from the journey there. Just in case, budget for subsequent visits
because you may not get a chance to accomplish everything in your plan. Remember, everything
takes longer in China.

CONCLUSION

When making decisions, Chinese businesspeople may not rely much on rules or laws. They
usually consider the specific situation rather than applying universal principles. Personal feelings
and experiences weigh more strongly than empirical evidence and other objective facts do.
Exceptions exist where party rules or government objectives force them to be more dogmatic.
The Chinese are often reluctant to take risks. If you expect them to support a risky decision, you
may need to find ways for them to become comfortable with it first You are much more likely to
succeed if the relationship

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“Social relationships and business networks: the case of western companies in China”,
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, Negotiating China: Case Studies and Strategies, Allen & Unwin, St Leonard .Bond , M.H. and
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“The social psychology of Chinese people”, in Bond, M.H. (Ed.),The Psychology of the Chinese
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“Coping with China”, Fortune, pp. 66-70.Chen, M. (1995), Asian Management Systems:
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