It doesn’t take an expertise in economics to know China manufactures a lot of stuff – just look at the label on your computer, floor lamp, and shoes. It is remarkable just how, three and a half decades after Beijing first launched market reforms, the country’s dominance in global manufacturing endures.
This fantastic infographic from the International Business Times, puts it in perspective:
So if you are a retailer or distributor, you’d most likely have to go through negotiations with Chinese manufacturers or suppliers.
This post is build on top of a previous entry, How To Improve Your Negotiation Skills And Get Better Deals Off Suppliers. While that post offers basic negotiation skills, this article explores in-depth and detailed ‘rules’ to take note of when you negotiate with manufacturers from China.
1. Understand That Negotiating In China Is A Team Sport
When negotiating in China, you will most likely face a team of negotiators across the table. A key challenge will be to identify the real decision maker in the group – there is usually only one – and the individual or individuals who can influence the decision maker.
2. Assemble A Capable Chinese Team And Enlist The Support Of Third Parties
Especially for those unfamiliar to the Chinese customs and way of life, a capable Chinese team can help to bridge cultural differences and aid your understanding of the nuances expressed by your counterpart. A good team can also develop useful back channels with the other side that can smoothen negotiations. By all means, use your guanxi, or the relationships that you have developed with the local government, to develop support for your position.
3. Leave Your Ego Behind
The Chinese don’t like ‘big talkers’; they pay more attention to what you do than what you say. So it’s better to be more understated and modest here. Setting artificial deadlines, threatening to walk out of negotiations, or giving in to displays of anger seldom work in China. Among other things, they call into question the sincerity of your desire to cooperate.
In addition, show your Chinese counterparts respect, and make an effort to get to know them on a more personal level. This will help you gain their empathy for your position. Much is made of thebaijiu (white rice wine) drinking sessions in China. There are, of course, other ways to bond with your Chinese patners, but drinking baiiju while having hearty meals together is certainly one of them.
4. Listen More & Speak Less
Patience is a virtue in China, so be accommodating and tolerant, and practice the ‘cold shower’ approach to decision making. Just when you think you know enough to make a decision and react, stop, think, listen some more, sleep on it, and then perhaps make your decision.
5. Be Fair, Reasonable, & Diplomatic
If your Chinese counterpart believes that you are being unreasonable, they may not openly say so, but your negotiations are likely to stall and go nowhere. If you disagree with your counterpart, don’t simply reject their position out of hand, but carefully explain your reasoning.
6. Become A Culture Vulture
Do not underestimate the importance of understanding your Chinese counterpart from a cultural standpoint. Refer to Hofstede’s cultural dimension theory for a framework for cross-cultural communication, developed by Geert Hofstede, a Dutch social psychologist known for his pioneering research of cross-cultural groups and organisations. This theory has been widely used in several fields as a paradigm for international management and cross-cultural communication, and can be applied to gain the upper hand in a negotiation setting.
Hofstede’s ‘dimensions of culture’ are general comparisons of values in different countries and cultures, and are useful in understanding how members of various societies are likely to behave in different ways in a given situation.
Power Distance Index (PDI)
Defined as the extent to which the less powerful members of institutions and organisations within a culture expect and accept that power is distributed unequally. China has a high PDI score, indicating that inequalities of power and wealth exist within the society and that the less powerful members of the society accept this situation.
Thus, when negotiating with your Chinese counterparts, be sure to acknowledge the leader’s power and authority, and keep in mind that most of them are probably not decision-makers and they need to go to the top for answers.
Individualism pertains to societies in which the ties between individuals are loose, and everyone is expected to look after himself or herself and his or her immediate family. The Chinese have a low Individualism ranking, showing that they are more collectivist in nature with close ties among members. Group success is more important than individual achievement, and the willingness to support the group and larger societal goals and one’s allegiance to group goals is more important than individual pursuits.
During meetings, show respect for age and wisdom in your Chinese partners. Also, get a grip and suppress your emotions so you can work in harmony instead of portraying outright your desire to pursue individual accomplishment, as harmony is deemed very important in the Chinese society.
This dimension focuses on the degree to which ‘masculine’ values like competitiveness and the acquisition of wealth are valued over ‘feminine’ values like relationship building and quality of life. China has a relatively high Masculinity ranking, indicating the society values traditionally assertive and aggressive ‘masculine’ traits shown through ambition, achievement, material possessions, and success.
Thus, keep in mind that your Chinese counterparts may expect male and female roles to be kept distinct. Furthermore, avoid discussing emotions or making emotionally based decisions or arguments while negotiating.
Uncertainty Avoidance Index (UAI)
This value determines the level of tolerance for uncertainty and ambiguity within the society. China has a slightly low UAI score, showing that the country has less concern about ambiguity and uncertainty, and has more tolerance for a diversity of opinions. This may even show that the society is less rule-oriented and values risk taking behaviour.
The low UAI score means that you shouldn’t impose rules or structure unnecessarily while negotiating with your Chinese partners, and don’t expect them to do so. Follow along with their informal business attitude. Furthermore, minimise your emotional response by being calm and contemplate situations before speaking.
Long-Term Orientation (LTO)
Formerly referred to as the ‘Confucian dynamism’, LTO focuses on the degree a society embraces, or does not embrace, long-term devotion to traditional values. It should come as no surprise that China ranks the highest in LTO, meaning the society prescribes to the values of long-term commitments and respect fro tradition, and where long-term rewards are expected as a result of today’s hard work.
It would help your meetings with your Chinese counterparts if you show respect for traditions and reward perseverance, loyalty, and commitment.
Most importantly, avoid doing anything that would cause your Chinese counterparts to ‘lose face’ – be humiliated or come to be less highly respected. To help your understanding with the psychology of ‘face’ (the key to the Chinese spirit), here’s a quote from Lin Yutang, influential Chinese author,
“Interesting as the Chinese physiological face is, the psychological face makes a still more fascinating study. It is not a face that can be washed or shaved, but a face that can be “granted” and “lost” and “fought for” and “presented as a gift”. Here we arrive at the most curious point of Chinese social psychology. Abstract and intangible, it is yet the most delicate standard by which Chinese social intercourse is regulated.”
To end off, here’s a tongue-in-cheek (but surprisingly accurate) visual display of 25 different negotiation styles around the world, done by Business Insider.