Driven by "China fever" and the belief that China needs foreign technologies, Western business people rushed into the Chinese market with various advanced technological solutions. Many succeeded but many others failed. An important reason for the failure is that the PRC condition has not been paid sufficient attention: Chinese government is the "biggest boss" and all State-owned-enterprises do business according to the government's priorities, policies and plans.
Foreign firms should above all, be sensitive to the guiding principles of China's social and economic development set forth by the Chinese Communist Party and the Chinese government, and also, should make a careful study of the Chinese government's priorities and implementation policies. These policies are often stated in five-year plans and official plans for different provinces and sectors and the WTO commitment. Priorities of China are available in some Western statistics. The priorities are also important indicators of what the Chinese want to spend their foreign exchange on.
Therefore, it is vitally important for a Western firm to determine whether its project comes into the priority project category or not. If the project is included in the Chinese priority categories, it will interest the Chinese side and negotiations will proceed relatively quickly; if not, there may be problems in everything. Energy, transportation and telecommunications are among the traditional Chinese priorities. Recently, revitalizing China's deficit-ridden state-owned enterprises is also added to the list of Chinese priorities.
Before priorities become public knowledge, foreign firms may still be able to glimpse much of the picture. For example, this can be done by establishing good relationships with the counterpart (Chinese negotiators) and by asking questions about the status of the particular project. The middleman can also be helpful in this case. Patience In the opinion of Germans as well of international management visions is that what persists very long without any visible reason not productive. It is just cost intensive and needs explanations. In China you have to bring time with you if you want to negotiate.
In general you can say that negotiations in China take three times more time than compareable negotiations in Germany. Some reasons of the long time negotiating are that the Chinese decision making as well as the communication between the Chinese economic organisations is very livelong (bureaucracy is working slow and partly because of tactical reasons). In a completely other way round could it go if Chinese companies want to make business with you. The everthing is going mostly qicker. Then they also want to handle fast to get a contract. Patience is the most important qualification for successful negotiations with the Chinese.
From the PRC condition point of view, China is large with many yet underdeveloped areas ranging from infrastructure to living facilities and problems of various types are bound to happen. Negotiations in China often take time because different Chinese organizations and different departments within one organization tend to be involved in negotiation processes and decision-making within the Chinese bureaucracy often takes time. From the vantage point of Confucianism, the Chinese will not rush into any serious meetings with someone whom they do not know; trust and a certain feeling of closeness must be in place for any negotiation to start.
The Confucian notions of relationship, face, etiquette, harmony, and so forth, are all timeconsuming qualifications. Therefore, it takes time to negotiate with the Chinese because it takes time to communicate with the "Confucian gentlemen. " When mutual trust is not very high and the Chinese are exposed to bureaucratic pressures, tricky situations are but common scenes in negotiating with the Chinese Price Price is a difficult and crucial factor in international business negotiations everywhere. But it proves to be even more difficult and crucial in negotiating with the Chinese.
On the one hand, the Chinese emphasize trust and sincerity; if a foreign firm reduces its price radically, the Chinese negotiators will get suspicious and the risk is high that the firm will lose its credibility in the eyes of the Chinese. On the other hand, the Chinese are face-conscious creatures; if a foreign firm rejects any Chinese request for a price discount, the Chinese will most probably feel insulted. Once the Chinese feel they have lost face before the foreign, they will certainly try to repay you by using whatever Chinese are necessary to deal with you in the next round.
When the Chinese find that the foreign side is "giving face" to them, they will adjust themselves accordingly and be more helpful and friendly in the later rounds of negotiations. Therefore, we recommend that foreign parties calculate prices and bargaining limits carefully, and always reserve certain margins to the Chinese to allow them to gain face. Experiences of other shows, that the Chinese negotiators often demand a rebate of 5% - 7% in price at the final stage of negotiations.
Then the foreign party should remain firm in the offers, emphasizing features (e.g. , technological superiority, high system capacity, room for product upgrading, and convenient postsale service) other than price that may bring special added value to the Chinese. Foreign firms can also adopt other strategies to try to influence the Chinese to negotiate the foreign way. Maybe you can bring Chinese negotiation partner through the foreign way of doing business by hold them for a longer time in your country to let them understand more about your cultural background. Another issue concerns the cost of foreign personnel.
The Chinese do not seem to be willing to pay for the huge cost of foreign expatriates. The daily cost of a foreign expatriate could be as much as the yearly cost of a dozen of Chinese employees. We suggest that the parties exchange views on both the PRC and the Western conditions in a frank and supportive manner to find good solutions for both to the problems. However, they do compare your price to that of the competitors People Because of the deep Confucian aversion to law and orientation toward interpersonal relationships, the Chinese believe in people more than contracts.
Foreign firms need to take a people oriented approach and try to establish a high level of trust with their Chinese partners. A trusting relationship is also the best way to neutralize the Chinese stratagems. Chinese teams' foreign visits are probably the best time for the foreign party to develop rapport and "guanxi" with the Chinese decision maker. Travelling in Western countries is still considered by many Chinese a privilege and, if offered with special hospitality, will be greatly appreciated by the Chinese.
According to the Confucian rules of relationships, the Chinese will reciprocate your hospitality when you visit China next time. In China, everyone will answer the question of what marketing is all about without hesitation: Guanxi. Guanxi As I already mentioned before, Guanxi in China is one very important thing based on the cultural/traditional development Chinai?? s. To get information or to built up trust and so on "Guanxi" is very important but how to get guanxi if you are a german company the first time in China. A good Guanxi did not let set up just in between few weeks or visits.
You can get good guanxi when you are a long time in Chinese business and if there is a trustfull relationship to the Chinese contact persons developed. When you are the first time in China searching after a man who already have the good guanxi is maybe the best solution to built up a own guanxi network. A good way for german companies to get guanxi is to built up a representative agency from where relations grow. "The Face" For most Western business man is this something very difficult to understand and to handle but it is one of the most important thing in making business negotiations with Chinese people.
Of course most german business man know about the importance to match with the Chinese tradition but the face mostly stay as an inscrutable expression. With loosing the face equal at which side of business partners you must have in your mind that this could be the end of all negotiations. I heard about some expatriates who didni?? t made much about holding the face they worked as they do in their country. In some cases this works. The Chinese partner learned to handle the western behaviour. So as you see it can also work in the other way round that the Chinese partner handle with the behaviour of the western partner.
Conclusion My conclusion is that negotiating with Chinese is not as worse as it in my assay sometimes seems to be. If you know and understand the cultural differences as a western person it is not easy but you will make good negotiations because in my opinion it is naive to think that chinese people do not know what your values are. They know as much as you know about them so they know that you manage the things in your country in another way round. So if you make a mistake I am sure chinese people will "forgive" (if it is not a part of the negotiating tactic to bring you in embarrassments with your mistakes).
Very important maybe most important in my opinion is the face because this is also very important for the chinese. Do not lose ones face. That is for a chinese people often not really forgiveable. The worst case what may happen if you let a chinese negotiating partner lose his face is that the negotiating process finish immediately. So this in my opinion one of the most important thing western people have to take care of in the negotiating process. Last I want to say that it was very interesting to work on this assay because I got a further inside view through chinese negotiating and with this the chinese culture.