The government regulations and requirements–both official and unofficial–that have traditionally made doing business in China toilsome and frustrating have, in fact, been significantly reduced since the 1990s and these barriers are continuing to come down.
In spite of this more hospitable business environment, there are still many stumbling blocks. Most foreign companies already doing business in China find their biggest ongoing challenges to be understanding and dealing effectively with the distinctive way Chinese businesspeople and government officials negotiate. This is also especially true of companies proposing to do business there. Hyperbolically speaking, the Chinese approach to negotiation is as different from the Western one as day is from night.
The overall process of Chinese-style negotiation is based on a precise number of cultural principles or themes that are characteristic of Chinese thought and behavior. Some of the most important of these themes are discussed in a number of key words already mentioned in this book, terms that I refer to as cultural code words, meaning they are impregnated with cultural meanings and uses that define the mindset of the Chinese.
In many ways, the most important of these key words refers to the self-image of the Chinese, often referred to as their “face.”
As mentioned in previous chapters, mianzi is generally translated as “face.” This concept is well known in the West, but has far deeper and broader implications in China than in the Western world. One of the secrets to succeeding in business in China is to have a lot of face and avoid causing anyone else to lose theirs. In a negotiating session, for example, causing someone to lose face–especially one of the higher ups–can bring the whole thing crashing down. By the same token, giving face to the team or its important individual members can be a major asset.
It is important for Western businesspeople negotiating in China to understand that their face is a changeable thing subject to negative and positive fluctuation. Your face is subject to being increased or decreased by everyday events that would be ignored elsewhere. You can lose face if you don’t succeed in a bargaining situation. You can lose face if a bank refuses you credit. You can lose face if someone below your status expects you to deal with him or her. You lose face if someone criticizes you. You lose face if someone insults you. You lose face if someone has damaged your face and you don’t get revenge. These are things that people can do to you, deliberately or inadvertently, to make you lose face.
You gain face by making wise decisions. You gain face by succeeding at whatever you are trying to do. You gain face when someone publicly compliments or praises you. You gain face by making new, powerful friends, and so on. People also gain face by wearing designer clothes and eating in expensive restaurants– even when these indulgences strain their budgets.
To the Chinese, organizations and companies also have face. It is important to keep this in mind and be wary of doing anything that might cause them to lose face in the eyes of their people. You should also give them face when the opportunity arises. Criticizing a company or organization that you want–or need–to do business with can come back to haunt you.
Foreign negotiators often cause themselves and their Chinese counterparts to lose face by getting angry, sounding off loudly, or breaking a promise.
In addition to other cultural factors that influence Chinese behavior, personal friendships that are warm and trusting are essential for success in business and are a factor in the Chinese way of negotiating.
Generally, the Chinese will not do business with people they don’t know well because they understand that what will bind the two sides together is trust, not a contract. They therefore spend a significant amount of time trying to learn as much as possible about potential business partners before negotiating an agreement.
Foreign businesspeople should make this process as fast and as easy as possible by providing the Chinese side with extensive dossiers on their educational and professional background. These dossiers should include any previous experience they have had in China, and any notable Chinese contacts they may have.
From the moment the Chinese meet new people, particularly foreigners, they begin to measure their characters and personalities and the warmth and friendliness of their attitude toward them. This includes taking stock of their attitude toward China, and is therefore not something that can be done in a matter of minutes, hours, or even days. It can go on for weeks and is one of the reasons it takes a considerable length of time to negotiate business relationships in China.
Instead of discussing projects and relationships in a straight line starting with A and ending with Z, the Chinese start anywhere between the two points, ignoring the linear progression that Westerners are conditioned to follow. This nonlinear approach resulted in the Chinese emphasis on what is now called holistic thinking.
During negotiations, this upsets the foreigners and leaves them in the dark about whether the talks are making progress. The only recourses they have for gauging their progress are after-hours meetings where they will have opportunities to ask one of the Chinese participants.
Western business is based on facts and truth; Chinese business is based on how things are done. This cultural difference can be a barrier during negotiations and while conducting business, but there is no fast, direct way around it. Getting past it is a matter of ongoing negotiation and finding solutions that both sides can accept.
As of yet, most Chinese do not regard time as money, and they see this notion as evidence that Westerners are profit-minded, money-hungry, and in many ways anti human. After all, both Confucius and Lao Tzu, two of China’s greatest thinkers, preached against making the pursuit of money one’s primary goal.
This is one reason why the Chinese do not feel any great sense of urgency to complete negotiations quickly, and instead sometimes continue with them for months or years. They have also learned from experience that lengthy negotiations result in foreigners giving away more and more in an effort to make a deal before they have to leave. In general, anyone contemplating going to China to negotiate a favorable or equitable contract in a few days would often be better off staying home.
China’s younger generations, however, have bought wholeheartedly into the concept of time being money, and now suffer the same stress-related symptoms that are common in the United States and other countries. As this attitude becomes more widespread, negotiating in China will become easier for foreign companies.
The Chinese have been compared to elephants when it comes to remembering things; it has been said that they never forget and never forgive. The positive side to this is that favors done for an individual, family, or company are commonly remembered beyond the present generation and repaid when occasion arises. On the negative side, there is a growing tendency among younger Chinese to hold grievances against Britons, Americans, Japanese, and others for historical offenses against China. This is not likely to change in the foreseeable future.
The painful lessons of China’s early exploitation by foreigners are still remembered today, and the Chinese often make use of them, subtly and otherwise, in the process of negotiations. The English may be reminded of the abuses their nation committed during the Opium Wars. Americans may be reminded that their nation’s military forces invaded China in the late 1800s. The Japanese are reminded of the atrocities committed against the Chinese during the 1930s and World War II.
The British and Americans generally are not swayed by this attempt to shame them into being less demanding. The guilt-ridden Japanese, however, have been very susceptible and have accepted extraordinarily disadvantageous conditions in order to do business in China. By 2005 the growing importance of Japan as a source of investment and a market for Chinese-made goods had begun to mitigate the influence of this “victim card,” at least on the governmental level. On visits to Japan, one Chinese leader after another made a point of announcing it was time to put the dark side of their shared history behind them. But that is not the end of the story.
The best response to comments about historical wrongs is to use diplomatic tactics to blunt or bypass the issue by pointing out the benefits that will accrue to China as a result of the relationship you propose.
The Chinese do not react positively to ultimatums. They are, in fact, seen as challenges that may call for countermeasures. As such, it is best not to use them. It is nonetheless important to set negotiation deadlines of reasonable lengths–and to be willing to walk away if they are not met.
Obtaining new foreign technology is high on the to-do lists of private and government-owned companies and government ministries in China. Just as the Japanese did in the 1950s and 60s, they regularly go into relationships with foreign companies primarily to obtain technology.
Foreign companies should weigh the gain versus the potential future loss before agreeing to such relationships. It often turns out that any gain is short-lived and any loss is dramatic.
Chinese negotiators commonly ask their foreign counterparts to toss some technology into the pot up front as a freebie. It is important to get something in return when agreeing to do this.