China Australia Negotiating Style

Most Westerners like to arm themselves for a business trip to China with a handy list of etiquette how-tos. Carry heaps of business cards, bring your own interpreter, speak in short sentences and wear a conservative suit.

While the above will get you past the first steps it will not build the long term relationship that most business and seeking and can now achieve. There have been many highly publicized breakdowns of business between Australian and Chinese businesses. The vast majority of these is due to a failure of the Australian side to understand the broader context of Chinese culture and values.

There is often the perception that the Chinese negotiators are inefficient, indirect and even dishonest while the Chinese see foreign negotiators as aggressive, impersonal and excitable. Such differences have deep cultural origins. This is seen more with Americans and less with Australians.

Four thick threads of culture have bound the Chinese together for about 5,000 years.

The first is agrarianism. Two thirds of the Chinese people still live in rural areas, labouring primarily in rice or wheat cultivation. Traditional Chinese agriculturee is peasant farming. It is communal, not individualistic; survival depends on group cooperation and harmony. Loyalty and obedience to familial hierarchy binds labouring groups together. Many of the Chinese city dwellers were born or raised in the country and have retained their agrarian values Before the 1980’s, agrarian values trumped business values. When during the cultural revolution Mao Zedong sent bureaucrats and students to be re-educated by the peasantry, he was reflecting the deep seated belief in the virtues of rural life. Chinese sages historically distinguish between the root (agriculture) and the branch (commerce). Social and economic theories and policies tended to favour the root and slight the branch – merchants – were thus looked down upon.

The second thread is morality. The writings of Confucius served as the foundation of Chinese education for about 2,000 years. During those two millennia, knowledge of Confucian texts was the primary requisite of appointment to government posts. Confucius maintained that a society organized under a benevolent moral code would be prosperous and politally stable and thus safe from attack. He also taught reverence for scholarship and kinship. Confucius defined five cardinal relationships between ruler and ruled. These were husband and wife, parents and children, older and younger brothers and friend and friend. Except for the last all of the others were strictly hierarchical. Rigorous adherence to these hierarchical relationships yielded social harmony, the antidote for the violence and civil war of his time.

Lao Tze was the inspiration for Taoism whose fundamental notions involve the relationship between yin (the feminine, dark and passive force) and yang (the masculine, light and active force). The two forces oppose and compliment each other at the same time. The implications are pervasive, affecting every aspect of life. Lao Tze said that the key to life was to find the Tao – the way between the two forces, the middle ground, a compromise. Both Lao Tze and Confucius were less concerned about finding the truth than finding the way.

These moral values express themselves in the Chinese negotiating style. Chinese negotiators are more concerned with the means than the end, with the process more important than the goal. The best compromises are derived only through the ritual back-and-forth of haggling.

The third cultural thread is the Chinese pictographic language. Chinese children learn to memorize thousands of pictorial characters. As Chinese words are pictures, not sequences of letters, Chinese thinking tends more towards a holistic processing of information. Michael Harris Bond, a psychology professor at the Chinese University of Hong Kong, found that Chinese children are better at seeing the big picture, while American (and most Westerner) children have an easier time focusing on detail.

The fourth thread is the Chinese wariness of foreigners, learned the hard way from the country’s long and violent history of attacks from all points of the compass. China has also fallen victim to internal squabbling, civil wars and the ebb and flow of empires. The combination yields optimism about the rule of law and rules in general. It is said that the Chinese trust in only two things: their families and their bank accounts.

These four cultural influences have given rise to a clearly defined set of elements that underpins the Chinese negotiating style. If Australians ignore these then the deal can fall apart. There are eight important elements of the Chinese negotiating style in the order that most Westerners will encounter them.

Guanxi (personal connections)

While Australians put a premium on networking, information and institutions, the Chinese place a premium on individuals’ social capital within their group of friends, relatives and close associates. Ignoring reciprocity in China is not just bad manners; its immoral. If someone is labeled wang’ en fuyi (one who forgets favours and fails on righteousness and loyalty), it poisons the well for all future business.

Zhongjian ren (the intermediary)

Business deals for Australians in China don’t have a chance without the intermediary. In China, suspicion and distrust characterize all meetings with strangers. In business, trust can’t be earned as business relationships can’t even be formed without it. Instead trust must be transmitted via guanxi. That is, a trusted business associate of yours must pass you along to his trusted business associates. In Chinathe crucial first step in this phase of negotiation, called non-task sounding, is finding the personal links to your target organization or executive. Those links can be home town, family, school or past business ties. What’s crucial is that the links be based on personal experience.

A talented Chinese go-between is indispensable, even after the initial meeting takes place. Only a native Chinese speaker can read and explain the moods, intonations, facial expressions and body language Chinese negotiators exhibit during a formal negotiation session. Frequently only the zhongjian ren can determine what’s going on. When an impatient Westerner asks what the Chinese think of a proposal, the respondents will invariably offer to kan kan or yanjiu yanjiu (let us take a look or study it) – even if they think the proposal stinks. This is where the zhongjian ren can step in as he/she is an interpreter of cultures.

Shehui dengji (social status)

Westerners frequently find it difficult to understand the formality of the Chinese business people. At some point, negotiations may require a meeting of equals in the hopes of stimulating cooperation. But top level Chinese executives will not be prepared to bargain and will not be persuaded. Its simply not their role. Rather, they will evaluate a relationship during a show of sincerity, or cheng-yi, by Western counterparts. And high-level meetings can work wonders. When GM was courting Shanghai Auto in 1995, chief executive John Smith made three trips to Beijing to meet Chinese executives. This is the reason you’ll see Buicks rather than Fords on the Bund.

Renji hexie (interpersonal harmony)

The Chinese saying : “A man without a smile should not open a shop” and “Sweet temper and friendliness produce money” speak volumes about the importance of harmonious relationships between business partners. Friendships and positive feelings, or renji hexie, holds relationships of equals together. In Australia the sizing-up (initial non-task soundings) takes minutes. In China it may last days, weeks or even months. And it includes home visits, invitations to sporting or other events, and long dinners during which everything but business is discussed.

Trust and harmony are more important to Chinese business people than any piece of paper. Until recently Chinese property rights and contract law were virtually non-existent and are still inadequate by Western standards. So it is no wonder that the Chinese rely more on good faith than tightly drafted deals. While contracts are becoming more important and are more likely to be enforced now China has joined the WTO, Chinese negotiators still insist on satisfaction with the spirit of the deal.

Zhengti guannian (holistic thinking)

The Chinese think in terms of the whole while Australians think sequentially and individualistically, breaking down complex negotiations into a series of smaller issues : price, quantity, warranty, delivery and so forth. Chinese negotiators tend to talk about the issues all at once and, from the Australians’ point of view, seemingly never settle anything.

Negotiators who practice zhenti guannian want long descriptions of background and context and will ask a thousand questions.

Australians consider talks finished when they come to the end of the list. Not so their counterparts who feel it’s at that point they can begin to think of the package as a whole.This difference in thinking styles is the source of the greatest tension between negotiation teams. It also often causes Australians to make unnecessary concessions right before the Chinese announce their agreement.

How can one know if negotiations are progressing well? It is a good sign if higher-level Chinese executives attend the discussions or if their questions begin to focus on specific areas. Also look for some recognizable softening of attitudes and positions on some issues. If the Chinese increasingly talk among themselves in their own language or their own common dialect it could mean that they are trying to decide something. Additional signs are Chinese calls for more meetings or requests to bring in the intermediary.

Jiejian (thrift)

China’s long history of instability has taught its’ people to save money, a practice known as jiejian. They save many times that of the average Australian household. The focus on savings results, in business talks, in a lot of bargaining over price, usually through haggling. Chinese negotiators pad offers with more wiggle room than most Australians are used to, and they make concessions on price with great reluctance. We often see Australians laugh at the Chinese base price or get angry at unreasonable counteroffers.

The Chinese are also adept at using silence as a negotiating tactic. This leaves the Australians in the awkward position of negotiating by asking questions. In defending price positions, the Chinese use patience and silence as formidable weapons.

Expect padded prices and ask the Chinese : How did you come up with that amount? If the Chinese talk about a competitive offer, ask about the competator, product, delivery schedule, warranty terms and so on.

All this can take time but it pays off.

Mianzi (face or social capital)

In the Chinese business culture, a person’s reputation and business standing rest on saving face. If the Westerners cause the Chinese embarrassment or loss of composure, even uintentionally, it can be disasterous for business negotiations. Mianzi defines a person’s place in his social network; it is the most important measure of social worth. Sources of face can be wealth, intelligence, attractiveness, skills, position and good guanxi.

The Chinese think of face in quantitative terms. It can be earned, lost, given or taken away. When those negotiating with the Chinese break promises or display anger, frustration or aggression, it results in mutual loss of face. In the West sometimes a mock tantrum is a negotiating tactic but in China it backfires. Causing the business partner who brought you to the table to lose face is a disaster.

Chiku nailao (endurance, relentlessness, or eating bitterness and enduring labour) : Where Australians place a large emphasis on talent as a key to success, the Chinese see chiku nailao as much more important and honourable. Haard work, even in the worst conditions, is the ideal; witness how Mao’s 18-month Long March endeared him to the Chinese people. And that industiousness now drives the country’s burgeoning free-enterprise economy.

We see Chinese diligence reflected in two ways at the negotiating table. First, they will have worked harder in preparing for the negotiations. Second, they will expect longer bargaining sessions. Throw in jet-lag and late-night business entertainment and Westerners are in for a tiring ride. Their Chinese counterparts know how to take advantage of this.

There are three tactics to show your own chiku nailao.

1. The first is to ask questions. Asking the same question moree than once – I didn’t completely understand what you meant. Can you explain that again? – can expose weaknesses in their arguments. Once this occurs, those across the table will be obligated to concede. The Chinese admire and respond to relentlessness.
2. Second, show endurance by going to great lengths to do your research, then educate your counterparts. Explain your company’s situation, but condescension will kill this approach, so be careful.
3. Finally, show patience. The Chinese rarely make concessions immediately after persuasive appeals without broader consultation. You need the backing of your home office so you can bide your time.

This article borrows heavily on an excellent article by John Graham and Mark Lam who are co-authors of Red China, Green China and given an Australian perspective by Geoff Da Deppo who has spent 19 years working between China and Australia.