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Understanding and Handling Chinese Negotiating Tactics

There are many corporations in the West these days that have turned their eyes and business to the East to seek opportunities from there.  Economic slowdowns and debt problems are some of the main problems that make them seeking to outsource to the East.  There is a huge economic expansion in China at this time as they are surrounded by a rapidly growing demand from consumers.  This has become almost totally irresistible to those who are just now getting introduced to the Chinese market for the first time.  However, conditions in China sets up new obstacles as well as challenges for those that are in the foreign market looking to establish business links.

Businesses that have been already established as well as new businesses are now seeing a few effective ways to expand into the environment created by this economic operating boost in China.  Corporations have become more competitive and in order to do so they must enter second and third-tier cities to establish business relationships with those who are more in a niche category or a regional company environment.  Gathering deals and these relationships within the cities are a great way to give the newer businesses a chance to get a foothold and expand from within their new area.  By doing this, corporations beyond Shanghai and Beijing will get the opportunity to proper in areas of China that are rooted in traditional characteristics.

Bigger cities tend to have companies and officials that have already experienced business with Western-style deal making.  Now, working outside of those cities gives corporations the change to hone their negotiating skills in a way that is through a Chinese-style way of business.  In China negotiation is a big part of doing business and is used in businesses already established and newer businesses that are growing in these areas.  Those corporations that negotiate in the traditional Chinese-style gives them a competitive advantage, especially if they do it well.

“Tan pan” in Chinese means ‘to judge’ as well as ‘to discuss’.  It’s the way they describe negotiations and take it to heart.  It means that it is a way to build trust between two parties forming a bond that when they come together to work both parties are benefited.  This open dialogue between the two parties helps to build trust by working through “tan pan”.  Giving each a chance to oversee the other’s capabilities.  By working together in such a way each party has the chance to feel like they’ve made a good deal.  They’ve created a structure for cooperation that binds the parties, each having reached their goal, for a long duration.  Negotiation is considered a dynamic ongoing part of the deal that considers context and practical matters.

Chinese Negotiating Tactics are tricky. They will tell you “China is different.” Do not fall for this statement; ask them to provide you the proof! Ask them to provide you the copy of the paragraph or section in their regulation.

In China, the art of negotiation is sometimes preferred to contract based deals as they see the contract as a Western-style way to negotiate.  The differential in doing business in a Chinese-style negotiation perspective can bring tension and negative perceptions on either side.  This leads to one party mainly the Eastern, seeing the other side as vague, dishonest and inefficient negotiators.  The other party, the Western comes off as being seen as impulsive, obsessed with immediate gain and impersonal.  Each must find a way to adapt to the style of the art of negotiation each party practices and find a comfortable medium for settlement.

Time and effort on the half of both parties is necessary to come to a successful agreement.  There needs to be a growth and understanding between the situation, capabilities and intent of the other company in order to reach the end goal.  Companies should consider and recognize few important factors for success.  They should know the deal that is on the table before them, know the party with whom you are trying to negotiate with, know yourself on an individual basis, establish credibility and know the other parties strengths and weaknesses.  All this together will bring to the table success on both ends.

All steps combined make up a situation that benefits both sides.  Knowing the deal means that it is crucial to understand the environment and circumstances under which the business will take place.  China’s business context can be different from what is used to on the Western front and vice versa.  Knowing the right questions to ask so each team can have a plan worked out and know what fits where and how throughout the negotiation on each side.  Also it’s good to understand the government regulations and pertinent stakeholders involved as well.  Without the other side understanding why an approach seems off key, efforts with the Chinese company could be slowed or stalled and the same goes if vice versa.  Knowing with whom you are working with from all sides gives you a better grasp on the deal at hand.  Western companies need to become knowledgeable about possible Chinese colleagues on several levels.  This way they can understand their intentions for starting a relationship at business level. 

Problems happen when things are rushed into.  For example, time and again persons are chosen because of their capability to speak English or chosen after just one meeting.  Companies should go through screening processes to choose a partner who is reputable and has mutual goals.  Each company should deeply investigate the other side’s capabilities to lower the chance of signing a contract that will just wind up needing to be re-negotiated or restructured in the future.

Proper due diligence is necessary before you share information about your company’s background, performance history, and commitments.  Westerner firms may show their value up front to prospective Chinese companies to demonstrate their seriousness and capabilities.  Don’t just know the other company’s strengths and weaknesses; know your own going in as well.  The other side will and you need to be prepared to counter successfully knowing where you stand in their eyes while letting them know where they stand in your eyes.

Just know that the Chinese way to negotiate is rooted in their culture and history and is an ongoing movement of shaping relationships and tending to them to benefit each other.  Negotiations don’t end when the contract is signed.  To the Chinese, it signifies the official start to the partnership that ends only when the relationship that has been garnered from it has been severed.