Negotiating With The Chinese

Referring to the frustration he experienced trying to negotiate mutually beneficial contracts with his Chinese clients during his first months in China, Frank T. Gallo, a former senior consultant with Watson Wyatt in China, and author of the insightful book, Business Leadership in China, tells how a Chinese colleague set him straight on the fact that his approach to negotiating was fundamentally out of sync with the one employed by the Chinese managers with whom he was negotiating.  Gallo writes,

“This conversation had a lasting impact on my work in China.  It is not something that Westerners usually come here knowing.  Rather, we trust the negotiating skill that we developed in our home countries – one that is based on a win-win philosophy.  It occurred to me (finally) that I was playing by a totally different set of rules from my clients.  Chinese managers were playing a game of ‘win-lose’.”

Chinese negotiators take no prisoners, as we might say in the West.  They will extract every pound of flesh you allow them to.IMG_0323

And there are a few reasons why.

First of all, their receiver-oriented communication style naturally carries over into their negotiating style.  This is only natural given that negotiation relies so heavily on communication at both the strategic and tactical levels. To their way of thinking, as a result, the requested party rather than the requesting party – the latter being the one who hopes to gain something that the other one has – is in control and responsible for the success or failure of the negotiation.

Which is precisely why they won’t hesitate to stomp on your wind pipe in negotiating a big business deal or a shopkeeper won’t hesitate to charge you five times what an item is actually worth.  In their worldview the blame is on you, the transmitter, not them, the receiver.

Their receiver-oriented perspective, moreover, introduces one of the most powerful negotiating tools in the Chinese negotiating quiver – the stall.  They understand momentum and leverage just as well as any Western negotiator does.  If current circumstances disadvantage them in any way, therefore, they will, if at all possible, wait for those circumstances to change.

They won’t tell you this, of course.  Why would they?  If you are an effective negotiator you might call their bluff (The word itself suggests a Western worldview of the strategy.) or you might be more careful to preclude a change that would put the leverage back in their favor.

And because Westerners are transmitter-oriented in their communication, the stall is a particularly effective negotiating weapon to use against most Westerners.  They get frustrated.  They lose patience.  They get infuriated.  Eventually they lose it.IMG_0873

The Chinese negotiator has achieved his objective.  He hasn’t achieved his original goal, of course, but he knew he wasn’t going to get there anyway.  Far better to postpone a negotiation than to lose one.

Two, of course, can play at that game.  You could just out-stall them and a fellow Chinese negotiator would probably attempt to do just that.  While they exist, however, I have seen few Westerners, particularly business people, who are skilled at the Chinese stall.  It just runs against our temperament, our training and our prior experience.

The second reason the Chinese negotiate toward a win-lose conclusion flows directly from the fact that they perceive fairness differently than Westerners do.  A wise and trusted lawyer I used to work with was fond of saying that the best contracts are the ones that everyone dislikes a little.

No Chinese negotiator would every think that, much less verbalize it.  The ideal outcome to them is one in which their hands are wrapped tightly and securely around your throat and your arms and legs are secured to the point of ineffectiveness.

The simple explanation for this difference in perception of fairness generally involves trust, or the lack thereof.  Trust is generally presumed in the West, but earned in China.  Trust is the flip side of obligation and both come to a Chinese relationship only after guan xi, a special personal bond on which much of Chinese culture turns, is established.

The more fundamental explanation for this difference, however, comes down to issues of reason.  Fairness, after all, is a rigid, linear standard.  It is a concept built on a foundation of theoretical order that presumes an objective universal standard that balances the needs and desires of individuals and society and to which every member of society is naturally obligated.

Within the more holistic and less linearly rigid philosophies on which Chinese culture is built, however, the concept of fairness is naturally more relative and less universal.  Like trust, obligation, the behavioral motivation through which fairness is enforced, is earned in China, not presumed.

But if the end game of a negotiation is different in China, so, too, is the process itself.  Western-style negotiation is a linearly logical process employing structured arguments designed to lead the negotiation from point “A” to point “B” to the desired outcome at point “C”.  It’s a process of presumed cause and effect, built on the assumption that if the argument is logically sound it will result in a win-win outcome that both parties will readily embrace.IMG_0368

The Chinese, of course, also want to get to their point “C.”   They do not, however, feel constrained by the need to pass through points “A” and “B” along the way.  To them a circular argument is just as sound as a linear argument if it achieves the desired result.  They may, as a result, approach the desired outcome, “C”, from point “D”, or even point “Q.”

To the Western negotiator, of course, such circular arguments can seem frustratingly irrelevant to the “A” to “B” to “C” argument they are promoting.  Relevancy, however, is a linear concept built on a presumption of cause and effect.  Remove that linkage and effect is all that matters.

As Gallo so aptly noted, the Chinese negotiator is not seeking a win-win solution that balances the mutual desires of the two parties through some objective universal standard of “fairness.”  In China success in a negotiation is a one-sided standard defined solely by how much one party can extract from the other – what Gallo refers to as the strategy of “win-lose.”

This is why it is imperative to let the Chinese with whom you are negotiating know exactly when you have reached the point of maximum extraction.  They won’t be compelled to stop when a “fair” result has been achieved.  They will only stop negotiating when they know they can extract no more.

This, however, can be a challenge to many Westerners.  In our desire to be polite and not offend we are often hesitant to be unequivocally firm in our response to an unacceptable demand, a cultural tendency reinforced by the mis-applied appreciation of the importance of relationship in China.

While relationships are critical to Chinese culture, however, negotiations are almost always considered by the Chinese to be outside the boundaries of relationship, particularly where a Chinese person and a foreigner are involved.  Business is business.  A business negotiation is an entirely impersonal process through which each party measures success solely by the result achieved.IMG_0277

So be prepared.  A business negotiation can be a rough and tumble affair in China.  It is not for the meek of heart.  If you’re close to a deal there may well be a lot of yelling and exaggerated body language.  Someone may leave the room.  Or light a cigarette in your non-smoking conference room.

You don’t have to react in kind.  In fact I discourage it.  You are a foreigner.  They don’t expect you to behave the way that they do.  Over-reacting may lead them to think that they’ve got you on the mat.  Or that you’ve totally lost your mind.  Both conclusions will just encourage them to push on.

But whatever you do, don’t confuse them.  Be firm.  Steely firm.  Smile if you like.  But don’t let your eyes be part of the gesture.  Let them know, clearly and with no need for translation, when you have reached your bottom line.

In the end, my advice is simple.  Unless you are a very experienced negotiator in a Chinese setting (It does not require that you speak the language.), leave any negotiating you have to do to the Chinese.  If you want to go to the market and buy something, take a Chinese person with you.  If you want to conclude a big business deal, tell your Chinese colleagues what you want to accomplish and what the boundaries are and sit back and observe.  But don’t move a muscle, and whatever you do, don’t speak.

Copyright © 2013 Glassmaker in China

Notice:  The views expressed in this post are strictly those of the writer acting in a personal capacity.  They are not in any way endorsed or sanctioned by his employer or any other individual with which he may be personally or professionally affiliated.

The wall around the historic central district of Xi'an kept enemies at bay.
The wall around the historic central district of Xi’an kept enemies at bay.