Negotiating International Business - China

This section is an excerpt from the book “Negotiating International Business - The Negotiator’s Reference Guide
to 50 Countries Around the World” by Lothar Katz. It has been updated with inputs from readers and others, most
recently in September 2011.

The People’s Republic of China is in the midst of a major transition from rigid communist country
to free-market society. Major style variances have evolved across the country’s business population
and must be considered when doing business here. For instance, significant cultural differences ex-
ist between rural and urban areas as well as between old people and younger ones. Generally, young
people in major urban areas are more aggressive and willing to move faster than older ones in rural
areas may be. Because of the highly competitive job markets in some of China’s business hot spots,
such as Shanghai or Shenzhen, employee turnover is currently significant among the younger popu-
lation. This makes them more near-term oriented and less focused on relationships than other parts
of the Chinese workforce. Nevertheless, the country’s culture is quite homogeneous overall.
While most Chinese businesspeople and officials have only limited exposure to other cultures, some
are very savvy in doing international business and may appear quite ‘westernized.’ Realize that
people may expect things to be done ‘their way,’ though, and let them set the pace initially until you
have had a chance to determine how your interaction can be most effective.
Owing to China’s long period of isolation, there used to be a general bias against foreigners. This
is gradually disappearing in many of the country’s business centers. However, it is crucial to show
respect for the country’s history and importance. While there is no problem with calling China a
developing country, do not refer to it as a third-world country. After all, China’s importance as a
powerful nation reaches back some 5,000 years. It was the cradle for countless groundbreaking in-
ventions and has dominated the world as its economic center over the course of several centuries.

Relationships and Respect

China’s culture is strongly group-oriented. Individual preferences are considered far less relevant
than having a sense of belonging to a group, conforming to its norms, and maintaining harmony
among its members. This is gradually changing among the younger generation. In any case, build-
ing lasting and trusting personal relationships is critically important. While members of other cul-
tures may expect this to happen gradually over the course of a business engagement, many Chinese
expect to establish strong bonds prior to closing any deals and to continue developing them into
true friendships as the business partnership continues. Consequently, proceed with serious busi-
ness discussions only after your counterparts have become comfortable with you, and keep in touch
on a regular basis during negotiations and beyond. Since the Chinese orientation towards time is
also different from most western countries, it is very important to remain patient and emphasize
frequently the long-term benefits as well as your commitment to the business relationship you are
seeking to build.
As in other Asian societies, relationships can create powerful networks. The Chinese concept, called
Guanxi, is based on very strong commitments and mutual obligations. In western societies, people
connected through close relationships expect certain favors of each other, but they are usually for-
giving if circumstances get in the way. In China, such obligations are non-negotiable and must al-
ways be fulfilled. Guanxi can open doors and solve problems that would otherwise be very difficult
to master. This makes relationship building vitally important when doing business in this culture.
Being able to leverage Guanxi can be highly beneficial for a negotiator.

Copyright 2006-2011 - Lothar Katz 1

Relationships are based on familiarity, respect, and personal trust. Business relationships in this
country exist between individuals or groups of people, not between companies. Even when you
have won your local business partners’ friendship and trust, they will not necessarily trust others
from your company. That makes it very important to keep company interfaces unchanged. Chang-
ing a key contact may require the relationship building process to start over.
In Chinese culture, ‘saving face’ is very essential. Harmony must be maintained at all cost, and emo-
tional restraint is held in high esteem. Causing embarrassment to another person or showing a
lack of respect may cause a loss of face for all parties involved and can be disastrous for business
negotiations. Reputation and social standing strongly depend on a person’s ability to control his
or her emotions and remain friendly at all times. If you have to bring up an unpleasant topic with
a person, never do so in public and always convey your message in ways that maintain the other’s
self-respect. The importance of diplomatic restraint and tact cannot be overestimated. Keep your
cool and never show openly that you are upset. Also, consider that a person’s face is a company’s face
– any individual employee’s embarrassment may be felt by the whole company and could put you
in a bad position.
Many Chinese, even among those with extensive international experience, consider the demand-
ing and fast-paced western business style as arrogant or even rude. They are particularly critical
of Westerners who appear to show off and ‘blow their own horn.’ Remaining modest and doing
everything you can to maintain cordial relations is crucial to your success. When receiving praise,
contrary to western practice, it is customary to insist that your are not worthy of it or to belittle your
accomplishments. Thanking the other for the praise may be taken as arrogance since it signals that
you accept the praise as valid. This should not stop you from complimenting others, though. While
the Chinese view politeness and humility as essential ingredients for a successful relationship, these
factors do not affect their determination to reach business goals. They are patient and persistent in
pursuing their objectives. It is in your best interest to do the same.
In traditional Chinese business culture, the respect a person enjoys depends on age, rank, and, to a
lesser degree, one’s achievements. You will commonly find leaders in senior roles to be of advanced
age. It is very important to treat elderly people with the greatest respect. Admired personal traits
include patience, humility, and fine manners.

Communication
There are several related but different Chinese languages and dialects, the most important of which
are Mandarin and Cantonese. While most businesspeople speak at least some English, their com-
mand of the language may be limited. It may be best to use an interpreter, in which case it is often
better to employ your own one than to rely on someone provided by your local counterparts. This
will help you understand the subtleties of everything being said during your meetings. However,
keep in mind that even professional interpreters may not always speak and understand English at a
fully proficient level. When communicating in English, speak in short, simple sentences and avoid
using slang and jargon. It will help people with a limited command of English if you speak slowly,
summarize your key points often, and pause frequently to allow for interpretation.
Chinese businesspeople usually speak in quiet, gentle tones, and conversations may include peri-
ods of silence. At times, Chinese people talking among themselves may appear emotional, but this
would be misleading. To the contrary, emotional restraint is held in high esteem. At restaurants,
especially those used for business lunches and dinners, keep conversations at a quiet level. Loud
and boisterous behavior is perceived as a lack of self-control. The Chinese generally converse while
standing around three feet apart. However, it is also not unusual to encounter situations where a
counterpart may seem to ignore one’s personal space altogether.

Copyright 2006-2011 - Lothar Katz 2

Because the concept of ‘saving face’ is so important in this culture, communication is generally very
indirect. When responding to a direct question, the Chinese may answer ‘yes’ only to signal that
they heard what you said, not that they agree with it. Open disagreement should be avoided and
any kind of direct confrontation is discouraged. People rarely respond to a question or request with
a direct ‘no.’ Instead, they may give seemingly ambiguous answers such as ‘I am not sure,’ ‘we will
think about it,’ or ‘this will require further investigation.’ Each of these could mean ‘no.’ It is benefi-
cial to use a similarly indirect approach when dealing with the Chinese, as they may perceive you
as rude and pushy if you are too direct. Only a person with whom you have no relationship yet may
occasionally give you a straight ‘no.’ This is a bad sign since it could mean that your counterpart is
not interested in engaging in business with you. If you have to convey bad news to the Chinese side,
a face-saving way is to use a third party instead of communicating it yourself.
Gestures are usually very subtle in China. It is advisable to restrict your body language. Non-verbal
communication is important, though, and you should carefully watch for others’ small hints, just
as they will be watching you. Avoid touching other people. Do not cross your legs if possible since
this may be viewed as a lack of self-control. Also, do not use your hands when speaking since the
Chinese will likely get distracted. When pointing at people or objects, use an open hand rather
than a finger. Lightly tapping on the table using all fingers of one hand means ‘thank you.’ When
referring to themselves, people put an index finger on their nose rather than pointing at their chest
as Westerners do. It is considered improper to put your hand in your mouth or to cross your legs
while seated. Eye contact should be infrequent. While it is beneficial to make some eye contact when
meeting a person for the first time, the Chinese consider frequent eye contact intrusive and rude. It
is generally considered respectful to look down when speaking with senior or elder people.
Do not take offense in the Chinese answering their mobile phones all the time, even in the middle
of important discussions. In this polychronic culture, interrupting one conversation to have another
one and then coming back to the first one is perfectly acceptable. It is not a sign of disrespect.

Initial Contacts and Meetings

Before initiating business negotiations in China, it is advantageous to identify and engage a local
intermediary. This person will help bridge the cultural and communications gap, allowing you to
conduct business with greater effectiveness. The person may be able to leverage existing relation-
ships, which could significantly shorten the time it takes until your potential partner is ready to do
business with you.
It is much better to conduct negotiations in China with a team of negotiators than to rely on a single
individual. This signals importance, facilitates stronger relationship building, and may speed up
the overall process. In addition, Chinese teams usually include highly skilled negotiators who know
how to outmaneuver even well prepared individual counterparts. Facing them as a team will sig-
nificantly strengthen your position. It is vital that teams be well aligned, with roles clearly assigned
to each member. The Chinese can be very good at exploiting disagreements between members of
the other team to their advantage. Changing a team member may require the relationship building
process to start over and should be avoided. Worst case, such a change can bring negotiations to a
complete halt.
Given the strong emphasis on hierarchy in the country’s business culture, a senior executive should
lead major negotiations for your company and your negotiating team should include senior leaders
who know your company well. In accordance with business protocol, people should enter the meet-
ing room in hierarchical order. The Chinese may assume that the first foreigner to enter the room is
the head of your delegation. The same is true on their side, allowing you to identify the most senior

Copyright 2006-2011 - Lothar Katz 3

person. You may get other clues by observing who receives the highest amount of deference within
a group of Chinese. That way, you may actually be able to identify the hierarchical structure across
the whole group.

If possible, schedule meetings at least four weeks in advance. Since the Chinese want to know whom
they will be meeting, provide details on titles, positions, and responsibilities of attendees ahead of
time. Agreeing on an agenda upfront can also be useful. If you are trying to meet with company
executives or high-ranking officials, be prepared for extensive back-and-forth communications until
everything is finalized, and do not postpone or cancel meetings on short notice.

Punctuality expectations largely depend on the meeting participants’ status and rank. The Chinese
are careful not to waste a senior person’s time. Being late to a meeting or social event without having
a valid and plausible excuse can be a serious affront, so it is usually best to show up right on time.
Meetings with lower-level managers are typically more flexible and may not even have a set start
time. In that case, arrive at your convenience and be prepared that you may be kept waiting for a
while.

Chinese names are usually given in the order of family name, first name. The latter may consist of
two parts, the generational name and the given name. However, the two are often spoken and writ-
ten as one. Some Chinese people use assumed western first names, in which case they give theirs
in the order of first name followed by family name. When addressing people, use Mr. /Ms. plus the
family name. Only close friends call each other by their first names, and you should never do so
unless a person has explicitly asked you to. Furthermore, the Chinese are very status-conscious. If a
person has a title or doctorate degree, use it to address him or her, for example, ‘Doctor Yu’, ‘Direc-
tor Wang’, or ‘President Chen.’ Leave out ‘Deputy’ or ‘Vice’, even if that part of the person’s title is
showing on the business card. In general, introduce and greet older people first. Introductions are
accompanied by handshakes and/or slight bows. Some people may not want to shake hands, so it
is best to wait for your counterparts to initiate handshakes, which should be light and may last as
long as ten seconds.

The exchange of business cards is an essential step when meeting someone for the first time, so
bring more than you need. If someone presents you with his or her card and you do not offer one
in return, the person will assume that you either do not want to make their acquaintance, that your
status in your company’s hierarchy is very low, or, quite to the contrary, that your status is very
high. Since many people are unable to read English, it is better to use cards with one side in English
and the other in Chinese. Show doctorate degrees on your card and make sure that it clearly states
your professional title, especially if you have the seniority to make decisions. If any facts about your
company are particularly noteworthy, for instance if it is the oldest or largest in your country or
industry, mention this on your card since the Chinese view this very favorably. Also, consider hav-
ing your company logo (but not the whole card) printed in gold ink. In Chinese culture, gold is the
color of prosperity.

Present your business card with two hands, and ensure that the Chinese side is facing the recipient.
Similarly, accept others’ cards using both hands if possible. Smile and make eye contact while doing
so, then examine the card carefully. Not reading someone’s card can be an insult. Next, place the
card on the table in front of you or into your card case. Never stuff someone’s card into your back
pocket or otherwise treat it disrespectfully. Do not write on a person’s business card.

At the beginning of a meeting, there is normally some small talk. This allows participants to become
personally acquainted. It is best to let the local side set the pace and follow along. People appreciate
a sense of humor, but keep it light and friendly, and be careful not to overdo it. Business is a serious
matter in China.

Copyright 2006-2011 - Lothar Katz 4

The primary purpose of the first meeting is to get to know each other, start building relationships,
and gather information about the other side’s areas of interest, goals, and weak points for the up-
coming negotiation. In general, meetings do not serve as events for decision-making. Instead, they
are opportunities to indicate interest, intensify relationships, gather and exchange more informa-
tion, or to communicate decisions. It would be unrealistic to expect a meeting to lead to a straight
decision.
The most senior members of your group should lead the discussion. In Chinese business culture, it
is inappropriate for subordinates to interrupt. It is good to make a presentation, but keep it simple
and avoid over-designing it. Verify through diplomatic questions whether your audience under-
stands you. Since saving face is so important, people will not openly admit it in front of others if they
do not understand what you are presenting.
You will likely find the atmosphere of the first meeting to be pleasant and amicable. Do not take this
to mean that your negotiation will be easy. People may turn tough and much more intense as soon
as the real negotiation starts. In this culture of respecting each others’ face, the context of a situation
often determines what behaviors are appropriate.
Most Chinese are comfortable with a high degree of initial vagueness. They may seem disinterested
in clarifying many details until you have both come a long way with the business deal. Westerners
may be uncomfortable with this perceived level of uncertainty. While it is acceptable and useful to
try and clarify as much detail as possible even when your counterpart may not be eager to do so, do
not read anything else into this style.
You should bring a sufficient number of copies of anything you present, such that each attendee gets
one. The appearance of your presentation materials is not very important as long as you include
good and easy-to-understand visuals. Use diagrams and pictures wherever feasible, cut down on
words, and avoid complicated expressions. Because many colors have a special meaning in China,
it is advisable to keep presentation copies, and even your actual slides, to black and white. Red is
generally safe to use for illustrations and backgrounds since the Chinese consider it a happy color,
but do not use it for text. Having your handout materials translated to Chinese is not a must, but it
helps in getting your messages across.
You may have to make presentations to different levels of the organization in subsequent meetings;
make sure that each is tailored to its audience. The Chinese side may also ask you at the end of the
first meeting to sign a Letter of Intent. The role of this document is to confirm the seriousness of
your intentions, not to serve as a legal contract. Check it carefully, though, since the Chinese may
abruptly terminate the negotiation if you do not strictly follow your commitments.
When a meeting is over, you should leave before your Chinese counterparts do.

Negotiation
Attitudes and Styles – In China, the primary approach to negotiating is to employ distributive and
contingency bargaining. While the buyer is in a superior position, both sides in a business deal
own the responsibility to reach agreement. They expect long-term commitments from their busi-
ness partners and will focus mostly on long-term benefits. Although the primary negotiation style
is competitive the Chinese nevertheless value long-term relationships. Chinese negotiators may at
times appear highly competitive or outright adversarial, fiercely bargaining for seemingly small
gains. However, even when negotiating in a fairly direct and aggressive fashion, they ultimately
maintain a long-term perspective and remain willing to compromise for the sake of the relationship.
Do not confuse the sometimes-aggressive style with bad intentions. Keeping relationships intact

Copyright 2006-2011 - Lothar Katz 5

throughout your negotiation is vital. It is best to remain calm, friendly, patient, and persistent, never
taking anything personally. It will also be very important to maintain continuity in the objectives
you pursue, the messages you deliver, and the people you include in the negotiation.
Should a dispute arise at any stage of a negotiation, you might be able to reach resolution through
emphasizing the benefits to both sides, remaining flexible and showing willingness to compromise.
Show your commitment to the relationship and refrain from using logical reasoning or becoming
argumentative since this will only make matters worse. Patience and creativity will pay strong divi-
dends. In extreme situations, leverage your local relationships (Guanxi) to influence your negotia-
tion counterpart’s decisions, or use a mediator, ideally the party who initially introduced you.

Sharing of Information – Chinese negotiators are willing to spend considerable time, sometimes
many weeks or even months, gathering information and discussing various details before the bar-
gaining stage of a negotiation can begin. Information is rarely shared freely, since the Chinese be-
lieve that privileged information creates bargaining advantages.
Be careful with what you are willing to share yourself and protect your intellectual property. In
China, people may consider all information available to them a property they are entitled to use to
their best interest.
Keep in mind that humility is a virtue in Chinese business culture. If you make exaggerated claims
in an effort to impress the other side or to obtain concessions, they will likely investigate your claims
before responding. This could prove very embarrassing.

Pace of Negotiation – Expect negotiations to be slow and protracted. Relationship building, infor-
mation gathering, bargaining, and decision making may all take considerable time. Furthermore,
negotiators often attempt to wear you down in an effort to obtain concessions. Be prepared to make
several trips if necessary to achieve your objectives. Throughout the negotiation, be patient, show
little emotion, and accept that delays occur.
The Chinese generally employ a polychronic work style. They are used to pursuing multiple actions
and goals in parallel. When negotiating, they often take a holistic approach and may jump back and
forth between topics rather than addressing them in sequential order. In multi-item negotiations,
people may bargain and haggle over several aspects in parallel. It is not unusual for them to re-open
a discussion over items that had already been agreed upon. In addition, they may take phone calls
or interrupt meetings at critical points in a negotiation. While they may be doing some of this on
purpose in order to confuse the other side, there are usually no bad intentions. Negotiators from
strongly monochronic cultures, such as Germany, the United Kingdom, or the United States, may
nonetheless find this style highly confusing and irritating. In any case, do not show irritation or
anger when encountering this behavior. Instead, keep track of the bargaining progress at all times,
often emphasizing areas where agreement already exists.
If your counterparts appear to be stalling the negotiation, assess carefully whether their slowing
down the process indicates that they are evaluating alternatives or that they are not interested in
doing business with you. While such behavior could represent attempts to create time pressure in
order to obtain concessions, the slow decision process in the country is far more likely causing the
lack of progress. People from fast-paced cultures often underestimate how much time this takes
and make the mistake of trying to ‘speed things up’, which is usually counterproductive. Again,
patience and persistence are vitally important.

Bargaining – Most Chinese businesspeople are shrewd negotiators who should not be underesti-
mated. Bargaining and haggling are aspects of everyday life, and people may use a wide array of
negotiation techniques competently.

Copyright 2006-2011 - Lothar Katz 6

The bargaining stage of a negotiation can be extensive. Prices may move by 40 percent or more
between initial offers and final agreement. Leave yourself sufficient room for concessions at many
different levels and prepare several alternative options. This gives the Chinese negotiators room to
refuse aspects of your proposal while preserving face. Ask the other side to reciprocate if you make
concessions. It is not advisable to make significant early concessions since your counterparts will
expect further compromises as the bargaining continues. You can use the fact that aspects can be re-
visited to your advantage, for instance by offering further concessions under the condition that the
Chinese side reciprocate in areas that had already been agreed upon.

Deceptive techniques are frequently employed, and Chinese negotiators may expect you to use
some of them as well. This includes tactics such as telling lies and sending fake non-verbal mes-
sages, pretending to be disinterested in the whole deal or in single concessions, misrepresenting an
item’s value, or making false demands and concessions. Lies will be difficult to detect. It is advis-
able to verify all information received from the local side through other channels. Similarly, they
treat ‘outside’ information with caution. Do not take such tactics personally and realize that overt
attempts to lie at or bluff your counterparts could backfire and might damage business relation-
ships. Since negotiation teams must be well aligned and always have to preserve face, people rarely
use ‘good cop, bad cop.’ It can sometimes be beneficial to use these tactics in your own negotiation
approach. Carefully orchestrated, they may allow you to obtain valuable concessions without dam-
aging the overall relationship. However, it could be devastating if the other side recognized this as
a tactic, and any ‘bad cop’ member of your team also needs to be excluded from future negotiation
rounds. The Chinese are not likely to use the ‘limited authority’ technique because groups rather
than individuals normally make decisions. Be cautious when using the techniques of making false
demands or false concessions. Since you must avoid causing loss of face, any overt attempts to bluff
your counterparts could also backfire.

Negotiators may use pressure techniques that include keeping silent, making final or expiring of-
fers, applying time pressure, or nibbling. Silence can sometimes be effective as a way to convey dis-
pleasure. Skilled Chinese negotiators may remain silent for a long time without showing any signs
of impatience. Don’t let this fool you into thinking that they are not interested. Final offers may be
made more than once and are almost never final. Do not announce any of your offers as ‘final’– your
counterparts will likely not believe that you are serious and may turn the tactic against you. Time
pressure can be difficult to counter. If Chinese negotiators learn that you are working against a dead-
line, they may exploit this knowledge to increase the pressure on you to make concessions. Near the
end of a negotiation, they may suddenly request large discounts, calling their request a ‘compro-
mise.’ In extreme cases, they may try to renegotiate the whole deal on the final day of your visit. It is
important never to take such techniques personally and to avoid open conflict. On the other hand,
time pressure techniques rarely work against them since the Chinese are patient and persistent
enough to overcome such challenges. However, you might be able to use these techniques should
the negotiation take place on your home turf rather than in China. Nibbling may prove useful in
the final phases of negotiations. None of this will take your counterparts by surprise, though. Avoid
other common pressure tactics such as opening with your best offer or showing intransigence, since
they cannot be applied effectively without running the risk of causing loss of face.

Chinese negotiators avoid most aggressive or adversarial techniques since they affect face. The risk
of using any of them yourself is rarely worth the potential gain. Exceptions are extreme openings,
which people use frequently, as well as threats and warnings. As long as extreme opening offers are
not openly aggressive, this approach can be effective. Should your counterparts appear aggressive
as the bargaining gets more heated, remind yourself that they may not perceive it that way. It might
be wise to deflect the pressure, for example by explaining other arrangements you have accepted
for similar deals in the past.

Copyright 2006-2011 - Lothar Katz 7

As in most strongly relationship-oriented cultures, negotiators may sometimes use emotional tech-
niques such as attitudinal bargaining, attempting to make you feel guilty, grimacing, or appealing
to personal relationships. Be cautious when doing this yourself. You might cause the other side to
lose face, which could damage your negotiating position.
At times, defensive negotiation tactics may be used. An exception is directness, which is rare in
China. People may be shocked if you are overly direct yourself, which can be counterproductive.
Note that opening with written offers and attempting to introduce written terms and conditions as
a negotiation tactic is rarely successful. In most cases, businesspeople will ignore or tactfully reject
them and request that each aspect be negotiated individually.
Corruption and bribery are quite common in China’s public and private sectors. However, people
may draw the line differently, viewing minor payments as rewards for getting a job done rather
than as bribes. Also, keep in mind that there is a fine line between giving gifts and bribing. What
you may consider a bribe, a Chinese may view as only a nice gift. It may help if you introduce and
explain your company’s policies early on, but be careful not to moralize or appear to imply that local
customs are unethical.

Decision Making – Organizations are usually very hierarchical. However, while you may some-
times encounter a western-style entrepreneur as the sole decision maker within their company, de-
cision making is normally a consensus-oriented group process in China. This can be confusing for
Westerners looking to identify the ‘key decision maker’ in an organization, while in reality such a
role may not exist at all. Decisions are often made through a process involving many stakeholders
who establish consensus through a series of deliberations and internal politics that outsiders have
very limited insight into. This process can take a long time and requires patience. Influencing the
decision making requires understanding the Chinese side’s intentions and building strong relation-
ships with as many influential stakeholders as you possibly can. The role of the senior leaders is
to orchestrate the process, not to make decisions themselves. Nevertheless, their input carries a lot
of weight and they may have the final say, so do everything you can to win their consent and sup-
port.
While the People’s Republic has made significant strides to open its economy to global trade, do
not underestimate the extent to which government bureaucrats still influence company decisions.
It is wise to contact national, provincial, and local government representatives to fill them in up-
front about your plans to negotiate with a local company. That way, you are more likely to receive
preferential treatment from your desired partner as they do not want to displease their government.
If your business interactions include a party or local government representative, it is essential to
include the person in the negotiation and treat him or her as a senior decision maker, even if the
person is or appears unfamiliar with the subject.
When making decisions, Chinese businesspeople may not rely much on rules or laws. They usually
consider the specific situation rather than applying universal principles. Personal feelings and expe-
riences weigh more strongly than empirical evidence and other objective facts do. Exceptions exist
where party rules or government objectives force them to be more dogmatic. The Chinese are often
reluctant to take risks. If you expect them to support a risky decision, you may need to find ways
for them to become comfortable with it first. You are much more likely to succeed if the relationship
with your counterparts is strong and you managed to win their trust.

Agreements and Contracts

Capturing and exchanging written understandings after meetings and at key negotiation stages is
useful since oral statements are not always dependable. While these serve as tools to improve the

Copyright 2006-2011 - Lothar Katz 8

communication and strengthen commitments, they should not be taken for final agreements. Any
part of an agreement may still change significantly before both parties sign the final contract.
It is important to realize that the Chinese have a view of written agreements and contracts that is
very different from the one most Westerners have. While the People’s Republic realizes that it needs
to establish and support the necessary legal framework to participate in global trade, most busi-
nesspeople rely primarily on the strength of relationships rather than on written agreements when
doing business. In the traditional Chinese view, agreements are just snapshots in time. They view
contracts as papers that document the intent of a working relationship at the time they were written
up and signed, not as final agreements designed to stand the test of litigation.
Written contracts are usually kept high-level, capturing only the primary aspects, terms, and condi-
tions of the agreement. Writing up and signing the contract is a formality. The Chinese believe that
the primary strength of an agreement lies in the partners’ commitment rather than in its written
documentation. Before signing a contract, read it carefully. The local side may have made modifi-
cations without flagging them. While this could be perceived as bad-faith negotiation in other cul-
tures, Chinese businesspeople may view the changes as clarifications.
Although your legal rights may not be enforceable, you should consult a local legal expert, ideally
throughout the negotiation or at the very least before signing a contract. However, do not bring an
attorney to the negotiation table, since this may be taken as a sign that you do not trust your coun-
terparts.
Contracts alone are not dependable. Because of their view of the role that contracts play, the Chi-
nese often continue to press for a better deal even after a contract has been signed. They may call
‘clarification meetings’ to re-discuss details. If you refuse to be flexible, allowing the relationship to
deteriorate, contract terms may not be kept at all. Arbitration clauses often do little to resolve such
a situation since arbitration can be very one-sided in China and you do not have the option to use
a foreign arbitrator. Your best chance to ensure that your partners follow through on their commit-
ments is to stay in regular contact and nurture the relationship throughout your business engage-
ment.

Women in Business
Gender roles in China are clearly distinct. Although women officially have the same rights as men,
they rarely manage to reach positions of similar income and authority. However, western-style
equality is beginning to have an influence in urban areas.
As a visiting businesswoman, you will generally encounter few problems when visiting China, pro-
vided that you exercise caution and act professionally in business and social situations. Displaying
confidence and some degree of assertiveness can be effective, but it is very important not to appear
overly bold and aggressive. If you feel that your counterparts may be questioning your competence,
it can be helpful to emphasize your company’s importance and your role in it. A personal introduc-
tion or at least a letter of support from a senior executive within your company may help a lot. If a
negotiating team includes women, it will be wise to let the Chinese side know about this up front so
they can mentally prepare for it.

Other Important Things to Know

Business meals and entertainment, in particular banquets and other evening events, are very im-
portant as they help advance the vital process of building strong relationships. Refusing to partici-
pate in such activities is a signal that you are not seriously interested in doing business with your

Copyright 2006-2011 - Lothar Katz 9

counterparts. Although business is commonly not discussed during these events, there could be
exceptions. Your Chinese counterparts may use such events as opportunities to convey important
messages or resolve disputes. Sometimes they may also try to obtain information from you that
could strengthen their negotiating position. While you will want to remain watchful, deflecting such
inquiries if needed, never show signs of mistrust in your counterparts’ intentions.
Especially with local companies that lack international expertise, business entertainment may some-
times include invitations Westerners might find highly inappropriate. In such cases, it will be very
important to find a way to avoid the issue without openly rejecting the invitation, as this may be the
only way to preserve face for all involved.
Gift giving is common in social and business settings in China. If you received one, it is best to recip-
rocate with an item of similar value that is typical of your home country. Giving a gift after signing
a contract is viewed very favorably. Give and accept gifts using both hands. Do not open gifts in
the presence of the giver unless your host did so first. There are numerous potential pitfalls in what
to give and how to wrap it, so prepare upfront or ask someone from the country to avoid causing
embarrassment.
Topics to avoid in discussions are China’s relationship with Taiwan, Hong Kong’s changing role, or
negative aspects around the government, such as the censorship it exerts over the media and the
Internet.

Writing the China section of Negotiating International Business would not have
been possible without the help of Dr. Yu Zhenyu and Shawn Yang, who both
deserve a special “thank you” for providing their ideas and suggestions, contrib-
uting experiences and profound insights, and giving open and candid feedback.

Negotiating International Business (Booksurge Publishing, second

edition 2007) is available from Amazon.com and other bookstores for
$29.99. A reference guide covering 50 countries around the world,
the 472-page book includes an extensive discussion of the negoti-
ation principles and tactics frequently referred to in this excerpt.
Please recommend this Country Section and others to colleagues who
might find them useful. Country Sections are available individually at

www.NegIntBiz.com

Copyright 2006-2011 - Lothar Katz

Modifying this excerpt, or using it in whole or in parts without proper attribution, is strictly prohibited by law.

10