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Negotiation in China: Key Tips You Need to Know

The Scotwork Team
Negotiation Give Take [Converted]
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China is one of the world's biggest manufacturers and has plenty of offers for contracts and business for those looking for global partners. Building relationships here can be of great benefit to those willing to chase the rewards.

If you have never negotiated with Asian business experts, never mind specifically Chinese negotiators, you may find that they approach problems very differently from others. While China does have a long and prosperous history, creating a rich culture for foreigners to explore, they have emerged into this century with strong economic growth and a desire to build commercial bridges to other nations all across the world.

Strong connections and deals have already been forged. The goods and services trade between the USA and China was estimated to be around $758.4 billion in 2022. China is also the EU's second-largest trading partner for goods, with bilateral trade in 2023 being worth €739 billion. Those looking to trade here should find plenty of opportunities waiting for them.

China's growth into a commercial superpower

China has grown exponentially since first opening up and reforming its economy in 1978. After heavy industrialisation and some periods of heavy growth, China has established itself as a leader in manufacturing. Today, the country produces half of the world's steel and 33% of global plastic production.

So important is China in many business deals that those with manufacturing or supply needs will often implement a risk strategy called China Plus One. This sees a company find two suppliers to fulfil their needs, one in China and one in another country such as India or Mexico.

The Chinese are not just focused on manufacturing and selling; they are also happy consumers keen to find their next product. With a focus on luxury, well-made products that can be browsed for and bought online, there is plenty for Western negotiators to explore if they wish to bring their products here.

The Chinese in business

Returning, as we have in previous articles, to the Lewis model, we will see that China is the first country we've visited that has a reactive culture rather than a linear-active one. Though it might sound like a reactive culture would be prone to explosive behaviour and shouting across the negotiating table at bargaining partners. However, this isn't true in the slightest.

Reactive cultures are named such because they prefer to sit back and listen to the facts before they react to them and make their own judgements. When preparing to meet your Chinese counterparts, prep negotiation tactics that favour a collaborative approach. They will appreciate the chance to get a full view of the table before they make any decisions. Make sure any negotiation you head into has adequate space and time to allow for a strategy to be considered and laid out.

5 tips for negotiating in China

You should never head into a negotiation without preparation. If we can give you one piece of advice, it will always be to do your prep work! Stepping into the boardroom in a completely different country can always be intimidating, so here are a few tips to help you out when negotiating in China.

1. Develop relationships

When negotiating with the Chinese, it is important to remember to work towards building good rapport with them. An important principle to learn is guanxi (关系), the cultivation of a network of trust and respect. Consider it to be somewhat like "the old boy network" of traditional business circles; it isn't what you know, but who you know.

If you intend to do business with the Chinese, you need to spend time nurturing your relationships. You will likely be meeting with the same negotiators time and time again. Get to know them, and be prepared to spend a lot of time together both in and out of the boardroom.

2. Show respect

As with other Asian countries, China puts a lot of importance on respect. Chinese culture honours elders, and it is important to always show respect to more senior business executives you may be negotiating with. Pay attention to titles and subtle body language cues that could indicate hierarchy and make sure to follow them.

If in doubt, do as your Chinese counterparts do. Whether they open with a small bow or a handshake, make sure you return it. If they use full names and titles while talking, do the same. By emulating their mannerisms respectfully, you will hopefully be able to avoid making a social faux pas.

3. Be prepared for haggling

Much of the ritual in negotiation with Chinese business partners will come in the back and forth of haggling. This is a common practice in many areas of life both in China and other parts of Asia. If you happen to visit a market looking for souvenirs, you can expect to haggle fiercely with vendors when buying goods from them!

Haggling forms an important part of negotiations as it allows both sides to make changes and offer their preferences. The Chinese understand that negotiations involve concessions, and so they give space to the haggling process. Don't be afraid to really get into it and declare what you want, this is why we negotiate, after all.

4. Anticipate long negotiations

Business negotiations can take a very long time. This is not about getting in and out with the best deal in the shortest amount of time; the Chinese negotiating style often looks to dissect and examine every corner of the deal before making an offer.

Prepare for long negotiations that could take days, if not weeks or even months, to pull to a successful conclusion. These deals may require many detailed discussions and support from both sides to reach a settlement that suits everyone. If you go in expecting a fast or easy meeting that will be done and dusted with little effort, you are going to quickly run into trouble.

5. Prepare for gifts, and give them in return

Some cultures consider gift-giving to be very important in business. Other cultures do not do this, and in places like the United States, there may even be very strict rules around receiving gifts to ensure nothing can be misconstrued as bribery. This is not the case in China; they love giving gifts as part of negotiations and business deals.

If you come from a culture that does not do a lot of gift-giving in business, it may seem a little odd. Presenting a beautiful and thoughtful gift is a great way to show that you have valued the time you have spent together in discussions. Aim for something meaningful but not extravagant; something unique to your homeland might be the perfect choice.

Be ready for any negotiation with Scotwork

Though heading into a negotiation with a completely different culture can be intimidating, doing your prep and having a wide range of negotiation tactics to draw from will always help you out. Remember that Chinese negotiators will value respect and the ability to think over a proposal and create a counter-strategy. Keep things open and honest, and be prepared to explain down to the last detail.

Scotwork's experts are here to help you gain the skills you need to take on any negotiation in China and beyond. Our coaching helps you to identify your strengths and weaknesses and grow to new levels of confidence in your abilities. Get in touch with us to find out more.

The Scotwork Team
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