City College Norwich, R&D Bulletin, June 2007

1. The Research and Development Bulletin
Negotiating the Chinese way
By Andrew M. Williamson, Visiting Tutor, Business School, City College Norwich
Introduction x Exploit your and their weaknesses
This article outlines the protocol and x Exploit your remorse
suggests suitable tactics for business x Trip you up
negotiations with the Chinese, the correct x Embarrass you
observance of which should improve the
x Play you off against your competitors
chances of securing a successful outcome. A
basic knowledge and understanding of x Approach you via a third party
general negotiating techniques has been x Pretend to be annoyed with you
assumed; thus what follows concentrates x Go over old ground with you
purely on the aspects peculiar to China. This x Quote their law at you
article tells it how it is, 'warts and all', since to x Manage your expectations.
do otherwise would be to send the foreigner
to negotiate with the Chinese like Daniel into The extent and manner to which any tactic or
the lion’s den without any hope of survival. response is used may depend on whether
Consequently, some readers may mis- the negotiations are unilateral (i.e. where
interpret some of the remarks as being only one party is trying to buy or sell) or
unkind towards the Chinese, when indeed bilateral (i.e. when both parties are interested
the intention is the opposite, for the following in buying and selling or working in
reasons: partnership). In the latter case, negotiations
are more likely to be conducted as between
x To pretend that anyone does not employ equals in a symmetrical manner (i.e. with as
psychological tactics during business much give as take).
negotiations in order to gain advantage
would be naïve Responding to Chinese negotiating
x What we in the West might consider to be tactics
improper behaviour is not necessarily so Most of the negotiating tactics that the
in China Chinese might employ may involve miànzi
x Causing offence, or 'loss of face' is (‘face’), as described in Williamson (2006)
unbecoming of a Confucian 'Superior and should therefore be countered by playing
Man' (i.e. Chinese gentleman) the Chinese at their own game and not rising
x The Chinese are not alone in this world in to the bait. For these reasons the following
being inveterate hagglers for whom guidelines are suggested.
outsiders are fair game in their efforts to
preserve their collective 'face' and When the Chinese try to control the
advance their collective good. arrangements
Thus, this is an attempt to strike a balance Traditionally, the Chinese prefer to conduct
between understanding why the Chinese and host negotiations with foreigners in
negotiate in a certain way, without being China, in an attempt to cast them in a
judgemental; and knowing how to respond to supplicatory role and thereby make them feel
them, without causing offence. The protocols subservient. Besides costing the foreigners
and techniques described below are time and money, the Chinese can play for
illustrated with a few examples, then time; however, being physically close to the
illustrated by a comprehensive case study. real decision makers with whom the Chinese
negotiators will necessarily have to consult
may speed up the process. This is because it
Chinese negotiating tactics
is neither usual nor the done thing for the
Chinese negotiators may try to: former to attend detailed discussions; but
x Control the arrangements rather appear only at the very end, when all
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2. Volume 5 Number 2 June 2007
is agreed, such as, for the official 'signing remind you of any damage done to China by
ceremony'. They may quibble over minor your country, hoping to persuade you to
details in the initial stages and then cram all ‘make amends’ by conceding terms that you
the important points into the final stages, might otherwise not accept, in order to save
delay proceedings and/or take time out, the ‘face’ of your country. In response refuse
ostensibly to confer in private, or never leave to discuss, and disassociate yourself from
you alone. By doing this they may hope to: such issues showing that you are impervious
coerce you into compromising (out of sheer to such tactics and insist on ‘sticking to the
desperation to reach some form of point’.
agreement before returning home, rather
than none at all), test your bottom line under When the Chinese try to trip you up
pressure, or, make you think that you have The Chinese are inveterate note-takers and
upset them, and thereby force you to reveal may quote back at you something you and/or
your bottom-line concessions in an attempt to your colleague(s) once said and/or agreed,
save your 'face'. In response you should play on and/or off the record, in- and/or outside
the Chinese at their own game by insisting the negotiating room. They may also forget
that some of the negotiations take place in something they said and/or agreed in similar
your home country and tell the Chinese your circumstances. Again, this may persuade you
time-table in advance, and stick to it, unless to concede to their terms, by honouring what
you really have to reach agreement before you and/or your colleague(s) said and/or
returning home. agreed on an earlier occasion, depending on
whether it supports or conflicts with your
When the Chinese try to exploit your and present stance, in order to save your ‘face’.
their weaknesses In response play the Chinese at their own
The Chinese may try to discover and exploit game by keeping your own detailed notes, in
your ‘Achilles’ heel’ as well as reveal and order to ‘retaliate’ and never speak off the
exploit their own. They may: play on your record or talk business outside the
personal and corporate fear of failing to negotiating room.
reach agreement; contrast China’s ‘poverty’
and lack of commercial experience with your When the Chinese try to embarrass you
company’s wealth and experience, or simply The Chinese lay great emphasis on formal
flatter you. In doing so they hope to persuade courtesy, as manifested in their observance
you to concede terms that you would of ritual etiquette, from which business is not
otherwise not accept, out of desperation exempt. They may use this to accuse you of
and/or to save your ’face’ by reaching some breaking the ‘ground rules’ that you agreed
form of agreement before returning home, at the outset; and/or unfriendly behavior. By
rather than none at all. In this situation you doing this they fool you into thinking that you
should resist taking the bait: if they see that have genuinely offended them, and thus,
you are impervious to such tactics, they may persuade you to ‘make amends’ by
desist, and if you really have to reach conceding terms that you would otherwise
agreement before returning home, never let not accept. Remember that the accusations
the Chinese know. are probably a ploy rather than genuine,
keep your own detailed notes, in order to
When the Chinese try to exploit your refute accusations of being devious and
remorse resist taking the bait; If they see that you are
The decline and fall of the Chinese Empire, impervious to such tactics, the Chinese may
and thus of China’s pre-eminence in the desist.
world, is in no small wise due to the
incursions of and invasions by foreign When the Chinese try to play you off
powers during the second half of the against your competitors
nineteenth and first half of the twentieth Besides genuine competition, the Chinese
centuries. The Chinese may choose to are not averse to ‘inventing’ fictitious
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3. The Research and Development Bulletin
competitors, either to imply you are less to. They may quote (allegedly) unpublished
generous and/or co-operative, and/or that commercial codes or say that their superiors
your products and/or services are more will only accept certain contractual terms
attractive, than the competition, or, share (e.g. standard wordings). Thus, they may fool
your competitors’ ‘secrets’ with you; and/or you into conceding terms that you would
imply that they are not negotiating (any otherwise not accept. Instead retain a legal
longer) with your competitors. They may then expert, obtain copies of the Chinese
either persuade you to equal or better the commercial codes and play the Chinese at
competition’s terms which you would their own game by telling them your
otherwise not accept, out of sheer superiors may never accept certain
desperation to reach some form of contractual terms.
agreement before returning home, and/or
test your bottom line under pressure. Or, they When the Chinese try to manage your
may coax from you genuinely confidential expectations
information, by lulling you into a false sense The Chinese may try to either raise or lower
of security. Be prepared for this by knowing your expectations, persuade you to concede
your competitors and play to your strengths terms that you would otherwise not accept,
even by contrasting them with their through fear of losing an apparent ‘done-
weaknesses, if your corporate culture so deal’ at the last moment, or, hide their
allows. inability to deliver as much as you had
originally hoped, and/or increase your
When the Chinese try to approach you via gratitude for whatever crumbs eventually fall
a third party from the Chinese table.
The Chinese may try to use third parties to
convey delicate messages or ‘test the
waters’. By doing this they save their own
‘face’ if the intermediary fails, by denying
(s)he was authorised to act on their behalf;
you should likewise use a go-between in this
situation.
When the Chinese try to pretend to be
annoyed with you
In theory, the Chinese disapprove of
outbursts of anger, however, in practice, they
are not averse to affecting anger if it will help
them get their own way and may accuse you
of some trumped-up charge. This may fool
you into thinking that you have genuinely
offended them, and thus persuade you to
‘make amends’ by conceding terms in order
to save your ‘face’. Remember that the
accusations are probably a ploy rather than
genuine and resist taking the bait.
When the Chinese try to quote their law at
you
The Chinese may assume they are more
familiar than you with their commercial law
and exploit your ignorance of the same to
justify not rejecting anything they do not want
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4. Volume 5 Number 2 June 2007
Dos and don’ts
When negotiating with the Chinese, it is strongly recommend that you ALWAYS:
Prepare beforehand Be prepared for much back-tracking,
repetition, ambiguity and inevitable
misunderstandings
Remember that the final decision(s) may Take detailed notes
be made by persons not at the
meeting(s)
Inflate your price Be able to walk away from the table
Play to the Chinese strengths Know where the exits are
Look for opportunities to empathise with Control your emotions
the Chinese
Display long-term commitment to China Check your ego at the door
Go over every detail of the contract Be careful what you say to the media
When negotiating with the Chinese, it is strongly recommend that you NEVER:
Try to resolve problems individually Assume there is such a thing as ‘China
plc’
Concede too easily Speak off the record
Hesitate to cut your losses Lose your temper
Reject a Chinese position out of hand Lose your patience
Assume that the Chinese may make Embarrass the Chinese
decisions for economic reasons alone
Gloat at a successful agreement
When negotiating with the Chinese, When negotiating with the Chinese,
ALWAYS prepare beforehand ALWAYS inflate your price
Ensure that you gain immediate access to Without being wholly out of line with the
the key Chinese negotiators, to try to help competition, try to inflate your price slightly
them devise language acceptable to their and then give away a lesser amount (say
decision makers. Otherwise you may 15% and 10%, respectively), so that both you
subsequently need to be referred to higher- and the Chinese ‘win’. Otherwise, the
level officials, who may disregard any Chinese may assume that your quote is
agreements you have already reached, and flexible and consequently, continue to haggle
oblige you to start again from scratch. Even if until they secure some concession. Such
you gain immediate access to the key concession may also give ‘face’ to the key
Chinese negotiators, any agreements you Chinese negotiators by allowing them to
reach with them may still need to be report some good news to their superiors,
reviewed and ratified by their superiors. who, in turn, may be more kindly disposed to
ratifying any agreements you reach.
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5. The Research and Development Bulletin
When negotiating with the Chinese, deal with a competitor. The Chinese may
ALWAYS play to the Chinese strengths leave you a way out, however, they may not
Your arguments should give ‘face’ to the necessarily want you to take it. You should
Chinese as the Chinese may remember, leave the Chinese an exit as a way of their
resent and retaliate against your taking saving ‘face’, a sign of your trust and,
advantage of their weaknesses. Always look consequently, a potential means of building
to empathise by being prepared to talk good will. If they take it, the sooner you find
around a subject rather than address it out the better. Leaving yourself an exit may
directly. Some Chinese may still consider it be more tricky, because unless they have left
good manners to take an indirect approach, one for you already they may misinterpret it
although others may be less sensitive and as a lack of commitment on your part.
more direct. Never express, or allow the
Chinese to sense any doubts that you may When negotiating with the Chinese,
have about the ultimate feasibility of the ALWAYS control your emotions and
object of your negotiations, the Chinese may check your ego
misinterpret your hesitancy as insincerity. The Chinese are not only conditioned to
control their own emotions but are also
When negotiating with the Chinese, reputedly able to read your emotions, which
ALWAYS go over every detail of the may put you at a disadvantage in the ‘poker
contract game’ of business negotiations. The Chinese
Ensure that you discuss all the issues, taking do not publicise (i.e. leak) agreements until
all the time necessary and allowed. they are signed, sealed and delivered, they
Otherwise, the Chinese may not fully also dislike surprises and hate public
understand the language nor, consequently, embarrassment.
the terms and/or conditions of the contract,
and/or may identify but consequently keep When negotiating with the Chinese,
quiet about some ambiguity in the contract NEVER try to resolve problems
that may subsequently benefit them and/or individually nor concede too easily
disadvantage you. Be prepared for much Instead follow the Chinese example of, first
repetition, ambiguity and inevitable listening to all the problems and only then
misunderstandings, but avoid ‘pointing the deciding what concessions if any you are
finger’ and remember that the person you prepared to give, always keeping a couple of
rebuke today may be your Joint Venture (JV) concessions up your sleeve, in case you
partner tomorrow! Always take detailed notes need to offer them to close the deal. The
as the Chinese are prone to asking Chinese may not only be non-plussed by
interminable and multiple questions all in one your zeal to please them, but also use it later
long sentence, which you will find much to embarrass you and then prove difficult to
easier to answer if it is transcribed and be persuaded to back-track on previous
broken down into its component parts. concessions, even though they may try to do
the same to you; use silence as a negotiating
When negotiating with the Chinese, tool. Follow the Chinese example of not
ALWAYS be able to walk away from the giving up anything without a fight however
table unimportant to you, since you can use it to
Never get yourself into a position where, the extract something from them, as they would
Chinese sense that, you need to have an you. By conceding something unimportant
agreement as they take advantage by easily, you may run the risk of convincing the
exploiting your position and/or push you to Chinese that you do not value it and will lose
the verge of aborting the negotiations as a its value as a bargaining chip. Never hesitate
ploy for them to determine your true bottom to cut your losses as the Chinese may not be
line, and/or pull out without their losing ‘face’, able to deliver what they promise. However,
when what they may really be after is never reject a Chinese position out of hand,
information to use as a weapon to strike a instead counter any preposterous proposition
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6. Volume 5 Number 2 June 2007
by the Chinese by drawing them into a x “Appeal to a higher-level decision-maker
discussion and/or steering them in a more x Ask the right question; push the right
constructive direction, since a rebuff may button
cause the Chinese a loss of ‘face’. x Be “Mr. nice guy”
x Show respect; be modest
When negotiating with the Chinese,
x Take risks
NEVER assume that the Chinese may
make decisions for economic reasons x Use your guanxi to go through the back
alone door.”
Profit is a relatively new motivator in China, (Seligman, 1997, pp.146-148)
the Chinese have traditionally made
decisions for political reasons, even if the The golden rule
project goes ‘belly up’, the technology may When all else fails, try the three “Fs” - be:
remain in China. Never over-estimate the Firm, Fair and above all Friendly. The
ability of your Chinese negotiators to resolve Chinese may set greater store by building a
the objections of their political rivals, nor, working relationship (‘guanxi’ – see
under-estimate the ability of such rivals to Williamson (2005)) with you than crossing
scupper the negotiations. There is no such every ’T’ and dotting every ‘I’ of an
thing as a corporate China when it comes to agreement. For them, personal trust is more
doing business, everyone is out for what important than paper-based contractual
(s)he can get for themselves or their ‘guanxi’ terms.
circle (Williamson, 2005). When negotiating
with the Chinese, never speak off the record Case Study
and control your emotions at all times. There Keep calm, even when someone asks you
is no such thing in China as speaking off the for an exorbitant favour in exchange for a
record, since: ‘anything you say may be promise that (s)he may not be able to deliver.
taken down and later used in evidence
against you’ when and however it befits Protagonists
them. Always be polite, softly spoken and The four protagonists in this case study are
gentle, although very occasionally, anger can a:
be used to good effect between you and the
x Foreign ‘businessman’ living in China (i.e.
Chinese; playing them at their own game. me)
The Chinese strongly disapprove of outbursts
of anger, which they consider a sign of x Chinese Potential ‘Joint Venture (JV)
weakness, following the teaching of partner’ known to me and with whom I
Confucius that, come what may, the already enjoyed good and direct relations
‘Superior Man’ should never lose his temper, x Chinese ‘Intermediary’ unknown to me or
which is a loss of ‘face’ but always exercise my UK head office (HO), but known to
self-control. When negotiating with the the ‘JV partner’
Chinese, you need to be patient since joint x Foreign ‘third party’ not living in China
ventures, even when all parties may appear known to the intermediary and my HO.
willing, can take several years to negotiate.
When complete, never gloat at the success Day 1 - Tuesday
of an agreement as if you have ‘won’ then One Tuesday, I received, via the ‘third party’,
the Chinese have ‘lost’, which will cause an unsolicited approach from the
them a loss of ‘face’. intermediary, who offered to set up a deal
with the potential ‘JV partner’. As it so
Overcoming objections happened, I had already arranged a meeting
Seligman (1997) suggests the following with the potential ‘JV partner’ early on the
supplementary tactics for overcoming following Monday morning (Day 5).
objections, where not already included
above:
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7. The Research and Development Bulletin
Day 2 - Wednesday have some command of English.
On the Wednesday, when I checked the x Advise him in Chinese on how best to
‘Intermediary’s’ credentials: negotiate with foreigners. Even if the
‘Intermediary’ did not know, the
x The ‘Intermediary’ explained that he:
interpreter might (through his work
- Would be present at the scheduled
exposing him to foreigners) and could,
meeting with the potential ‘JV partner’,
therefore, help save the ‘Intermediary’s’
whom he claimed to know well
‘face’ since there was a fair chance that I
- Wished to help me better understand was unlikely to know Chinese well
the potential ‘JV partner’s’ position so enough fully to understand what was
that both parties might reach a mutually being said.
beneficial agreement.
x The potential ‘JV partner’ denied all Playing the ‘Intermediary’ at his own game
knowledge of the ‘Intermediary’s’ role. (i.e. in order to ‘level the playing field’), I then
also invited my Chinese bi-lingual personal
assistant (PA), to attend in order to:
Day 3 - Thursday
On the Thursday morning, after consulting x Even up the numbers; which suggested
my HO, I reluctantly agreed to meet the subtly to the ‘Intermediary’ that I knew the
‘Intermediary’ on the following morning basic ‘rules of the game’ and was,
(Friday – Day 4), in order to: therefore, no ‘greenhorn’;
x Placate the potential ‘JV partner’ just in x Advise me in English on how best to
case the ‘Intermediary’ really were able to negotiate with the Chinese and thereby
jeopardise the meeting help save my ‘face’, especially as the
‘Intermediary’ was unlikely to know
x Save the ‘face’ of the ‘Intermediary’ by
English well enough fully to understand
not saying “no” (which might have shut
what she was saying
the door to further negotiation)
x Monitor the performance of the
x Please the ‘third party’
‘Intermediary’s’ interpreter, since it was
At the same time, I made it clear to the apparent from the outset that the
‘Intermediary’ that I would only agree to his interpreter might not have a good enough
attending the scheduled meeting with the command of English correctly to translate
potential ‘JV partner’ if the latter also agreed, my nuances. This would also keep in
which, at the time, they had not. check the interpreter’s advice to the
‘Intermediary’
Day 4 - Friday x Demonstrate my seniority (I was Director
On the Friday morning, the meeting took for China of the leading UK insurance
place in my office. company) and re-enforce my ‘face’,
True to Chinese negotiating tactics to try to since, had I not done so, the
gain the upper hand, the ‘Intermediary’ ‘Intermediary’ might have concluded that
brought along an interpreter, probably in I was not senior enough to warrant one
order to: and, thus, not his equal.
x Counter the twin disadvantages of being
Proposal
the guest and not on his own territory by
The preliminaries over, the ‘Intermediary’
‘upping the numbers’ with an ally. Most
claimed that the potential ‘JV partner’ had
such meetings are normally hosted by
three pet major building projects. If I were to
the Chinese and on their own territory, for
finance just one, the potential ‘JV partner’
which reason he probably expected to be
might consider agreeing to a joint venture
outnumbered by ‘hostile’ people.
were another company also to finance one;
x Gain ‘thinking time’, whilst the the potential ‘JV partner’ would have to
proceedings were being translated, since choose between me and that other company.
most educated Chinese in his position Were I or that other company to finance two,
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8. Volume 5 Number 2 June 2007
there would be no contest (i.e. assuming that request for a substantial bribe. Later that
the total value of both projects exceeded that afternoon, about 4 p.m., the potential ‘JV
of the remaining one); were I or that other Partner’s’ secretary telephoned my PA to
company to finance three, well then …! He cancel the meeting scheduled for early the
was giving me first refusal, since, having following Monday morning (Day 5), pleading
done his homework, he considered my a last-minute summons to a high-level
company to be the ideal candidate for the governmental meeting. Such an excuse is
potential ‘JV partner’. not uncommon and frequently genuine,
which in this case, it was subsequently
Response confirmed to be. On informing my HO, I was
My reaction was politely to: told that the ‘Third Party’ had already
Listen attentively, take copious notes and informed them that the ‘Intermediary’ had
ask appropriate searching questions - in complained of my lack of co-operation; a
order to dissemble my incredulity at the charge that the HO flatly denied.
sheer scale and ‘cheek’ of the proposal with
feigned interest as well as ensure the Happy ending
‘Intermediary’ saw that I accurately recorded Some two to three months later, I invited the
the details of the proposal. potential ‘JV Partner’ to a banquet, which
Explain modestly that I could not decide, but they accepted. Some 18 months later, I
would have to refer to my HO immediately, happened to meet by chance a
(in order to save my own ‘face’). Since the contemporary from school who, to cut a long
Chinese have made an art of public story short, turned out to have been the
demonstrations of modesty, prefer collective ‘Third Party’! After a brief conversation, the
over individual decision making as a means ‘Third Party’ retracted his view of my
of taking advantage of collective wisdom and performance; he had no idea of the
do not like to make ‘off the cuff’ decisions, Intermediary’s proposal; which shocked him.
the ‘Intermediary’ would recognise this ploy
as typically Chinese and thus accept it with Footnote
good grace. Even if I had conceded, there was no
Warmly thank the Intermediary for the guarantee that the joint venture would have
opportunity of ‘first refusal’ for such projects, been successful. True, chequebook
in order to build the ‘Intermediary’s’ ‘face’ in negotiating has reputedly worked
true Chinese style by expressions of flattery occasionally in the past, but the Chinese are
and gratitude, albeit false, in front of others. reluctant to bite the hand that feeds it. In
Promise to let him have an early answer, other words, while they can still dangle
rather than say no, in order to save his own carrots and receive presents, why hand over
‘face’ and keep the door open. Since the the carrots?
Chinese refuse politely in a number of ways, As a fellow Chinese academic once said to
including lying, without exactly saying no as a me: why should the Chinese use their own
means of saving ‘face’, avoiding shutting the money, of which he claimed that they had
proverbial door to further re-negotiation and more than sufficient, while the West is
leaving room for further manoeuvre, the prepared to hand theirs over by the
‘Intermediary’ would recognise this ploy as barrowful?
typically Chinese and thus accept it with
good grace. Further information
www.minim.biz
Outcome
After the ‘Intermediary’ left, I immediately References
reported to my HO, which agreed that I had Seligman, S.D. (1997). Decoding with the
acted wholly appropriately; whilst my Chinese. Management Books 2000, UK.
Chinese PA expressed her shock that what Williamson, A.M. (2005). Guanxi: the key to
had just happened was undoubtedly a
50 The Research Centre, City College Norwich

9. The Research and Development Bulletin
doing business with the Chinese. The
Research and Development Bulletin 3(2),
Norwich: The Research Centre, City College
Norwich.
Williamson, A.M. (2006). Miànzi, kèqi and
xiào: insights into the Chinese business
psyche. The Research and Development
Bulletin 4(1), Norwich: The Research Centre,
City College Norwich.
The Research Centre, City College Norwich 51