Five Keys to Negotiating with the Chinese

By Bill Quarless
October 2006

{Note: This column appears in the October 2006 issue of Response Magazine. Click here to read it on the Response Web site.}

China business practices are changing to match American ones, but the influence of 5,000 years of Chinese culture and history should never be underestimated. The key to successfully negotiating with the Chinese is to understand their common values and how these values influence business decisions.

In American business, we prize aggressiveness, assertiveness and individualism. Not so in China. The Chinese admire respect, loyalty, harmony and trust. With this in mind, DRTV companies would do well to follow these five keys when negotiating with the Chinese:

1. Be Patient

In America, a quick meeting is often all you need to get things going. In China, business is a long courting process, so don't expect great results from a single meeting. You must first build your guanxi - that is, your social capital. Since there is no such thing as a purely business relationship in China, you and your counterparts will need time to get to know each other personally. The process of mixing business and friendship to build mutually beneficial relationships is the core of Chinese business. Guanxi is currency, and it is carefully cultivated over time. If you embrace this principle, your negotiations will go a lot more smoothly. If you reject it, you will be at a distinct disadvantage at the negotiating table.

2. Eat, Sing & Drink (if your liver can handle it)

So how do you build guanxi? One way is to socialize with your business partners. That means dinner, drinks and, yes, karaoke. What may seem like "party time" to inexperienced Americans is really an opportunity for businessmen to observe the behavior of their potential partners in a relaxed setting. After all, few people can conceal their true nature after a few drinking games and silly songs. On a side note, don't be afraid to let your prospective partners pay the tab. Your time, not your money, is what shows your interest.

3. Save Face, Give Face

An outburst of anger or frustration may be effective in U.S. business negotiations, but it's the quickest way to sour negotiations with the Chinese. Stay calm. When you lose your cool, your counterpart loses face, and face is everything. This principle, called mianzi, works in both directions. When you compliment your counterparts and sing their praises to superiors, you give them face - and that's real capital you can cash in later. The Chinese will appreciate your need to save face with your boss, and be more willing to accommodate you as a result.

4. Use Contacts

If guanizi and mianzi seem like slow ways to close a deal, that's because they are. It's important to remember the Chinese come from an ancient culture, and they tend to think long term. So what's an American with urgent deadlines to do? One option is to use a zhongjian ren, or intermediary. Many times an introduction from this trusted person is all that's required to jump start a relationship. When a zhongjian ren introduces you to a supplier, he essentially vouches for you, so you start off borrowing his trust and credibility.

5. Create Trust (forget the NDA)

If you don't have a zhongjian ren, there are other ways to expedite the trust-creation process. For example, I always recommend that clients forego the non-disclosure agreements (NDAs) that are so common in American business. For one, NDAs are typically unenforceable in China. More important, they start the relationship off with an air of distrust. Choose reputable vendors and carefully share your confidential products with them. A firm handshake and personal commitment are worth so much more than a piece of paper in China.

With the above points in mind, the value of a reputable trading and sourcing partner in China can't be overstated. A well-established firm has spent years mastering the intricacies of China business, which go well beyond the five simple keys I've shared. The right trading partner will have plenty of guanxi, be a master in the art of mianzi and could very well be the zhongjian ren that saves you a lot of time and money.