I was recently in an interview where I was asked a question: What areas do you cover when you teach Finnish companies how to negotiate in China? That was a tricky one. In China you don’t have only one way to negotiate. You must know who you are negotiating with.
Google Scholar finds you 201 000 articles when you use search words ”business negotiations China”. In the library of Helsinki School of Economics there are 18 publications about negotiations in China. There was found even one dissertation about Chinese business negotiating style. The funniest publications are those that are trying to generalise the negotiation styles and give you exact orders how to succeed in your business negotiation. Surprising claim was by Williamson (2005, ”Living and Working in China”) that a meeting in China should never take longer than from half an hour to an hour. That is very rare occasions when you succeed in this. And it is not because you did not try enough to finish on time.
The dissertation by Tony Fang (1999, ”Chinese Culture and Chinese Business Negotiating Style) identifies six dimensions of Chinese business negotiating style:
- Political behaviour. Chinese companies must follow the government’s rules and the government is the ultimate decision-maker.
- Legal behaviour. Contracting is seen as a continuous problem-solving relationship rather than one-off legal solution.
- Technical behaviour. The Chinese want to co-operate with large technologically strong companies and acquire R&D oriented state-of-the-art technology.
- Commercial behaviour. The price and technology are the major concerns in the negotiations. The Chinese tend to seek for co-operation with large and financially strong foreign companies.
- Social behaviour. The Chinese aim to create personal relationship and trust before the negotiation process and they are people-oriented. Sincerity and reputation of the foreign side are important factors.
- Strategic behaviour.The Chinese employ various negotiation tactics both deliberately and unconsciously. Chinese stratagems derive from Sun Tzu’s military strategy, The Art of War. Those include e.g. deception, bluffing, manipulation. conquering by strategy, espionage, benchmarking, shared vision, prudence, flexibility, leadership, shaming etc. The main reason for Chinese using the stratagems in the business is the belief that ”the marketplace is like a battlefield”.
Though business style in China is getting more Westernized, these dimensions still exist. However, the amount of their existence and the emphasis vary depending on what kind of organization and people you are negotiating with. Referring to the Fang’s (1999) dimensions my observations include:
- Political behaviour. The size of the negotiating parties, field of industry and the business’s influence on the operation environment determine in great extent the role of the government in the negotiation process. Bigger the companies, more sensitive the field of industry and more significant the public influence of the business, greater the role of government is. For example, small and medium sized ICT, electronics and trading companies should not worry too much about the involvement of the government in the negotiation table.
- Legal behaviour. The attitude of the Chinese toward contracts is really different from the Western style. Contract can be negotiable still after signing. Unlike in Finland. One Finnish businessman once said that they always aim to do a little bit more in China as they have promised in the contract. This helps them to negotiate more favourable contracts with the same clients in the long-run. The contracts are likely seen as guidelines and framework of the project rather than binding obligations.
- Technical behaviour. Large multinational companies tend to have better reputation and credibility in China than small and medium sized foreign companies. Yet, they have more resources to invest in R&D. Therefore they are more easily accepted in the negotiation table. However, in the current global competition especially the Chinese ICT companies have opened up to new opportunities and they seek for innovative and agile co-operation partners also among the small foreign companies.
- Commercial behaviour. The price matters. The price determines. Still. If the technology is unique and provides significant competitive advantage, then the price is not the major issue. However, the deal is most probably not closed until after several negotiations. The financial background of the foreign company is most likely checked before the negotiations. For example, the economic crisis influenced notably in the textile industry in China. Thousands of clothing factories were shut down as the customers (including foreign companies) could not pay for their suppliers. Therefore the risk of not getting paid is existing, not only in the textile industry.
- Social behaviour. Relationships matter. It is more difficult to cheat a friend than a stranger. Social status has a great importance as well. Higher the status, easier to get into favourable negotiation table. However, as the Chinese companies have adapted more and more Western negotiating styles, the importance of personal relationships have diminished. The background of the people has great influence on the importance of the personal ties. If you are negotiating with 60-year-old Chinese director with the government background, you may need to socialize with him over dinner, drinks and karaoke few times before even getting to talk business. However, if your opponent has international experience, for example he has lived abroad or the company he represents is multinational, the negotiation can go straight in to business. If you are meeting with a group of people, you should find out the person with the greatest authority and select the negotiation style according to his preferences. Understanding the social behaviour and its importance in each negotiation really requires a good eye for the game. Foreign negotiators must be sensitive to interpersonal relationships and understand the value of trust.
- Strategic behaviour. There are as many strategies in the negotiation table as there are people. Therefore, it is recommendable to create friendly negotiation environment; get to know the opponents, create trust and emphasis on personal relationships. One should not forget that the Chinese are humans as we all. They feel, they hear, they see. Therefore a good common sense is the best asset you may take with you to a business meeting.
Back to the question of the title. How to teach how to negotiate in China?
1) The first thing is to make to understand the diversity of the people and the organizations. Therefore, one must understand the Chinese culture and history. Cultural sensitivity counts a great deal.
2) The second thing is to get familiarized with the Chinese hierarchy system. The real decision-makers might not even sit in the negotiation table. In order to succeed in the negotiation table, the right approach and the combination of people should be determined when setting up a meeting.
3) The third thing is to teach to understand the operational environment. The negotiation styles are different in the North and South, in rural areas and urban areas, in science parks and in commercial centres etc. The influence of the government varies depending on the regional areas, fields of industries and the size of the companies.
One thing that you really can not teach is the cultural sensitiveness, social skills and the eye for the game.
