How To Import From China
1. Take all the time in the world
Foreign business visitors are often deadline-driven and unwilling to slow down to the Chinese pace when discussing business. But in China the pace can be quick and slow at the same time. Those involved in negotiations know how long they can drag on when the Chinese side is consulting internally or has other reasons for delay. But Chinese negotiators can move with great speed on other occasions. Part of this feeling is subjective. Any chess player knows how long you have to wait for the other player and yet how fast you must move yourself. Nevertheless, Chinese negotiators use time more consciously than their Western counterparts.
2. Understand to separate fact from fiction
Almost everything you hear about China is correct, and so is the opposite. Western thought is centred around linear logic whereas Chinese thinking is influenced by early philosophers, who saw a paradoxical balance of opposites in all circumstances. Where Westerners tend to look for exact alternatives (option A instead of option B), the Chinese may examine ways to combine both option A and option B. This difference in approach may make a foreigner think that a Chinese negotiator is being implausible, evasive or devious, when they believe they are actually being straightforward.
3. Build relationships
Foreigners generally build transactions and, if they're successful, a partnership results. However, the Chinese believe that prospective business partners should build a relationship first and, if successful, commercial arrangements will . This difference underlies many misunderstandings arising from business negotiations. Almost all successful transactions in China result from careful cultivation of the Chinese partner by the foreign one, until a relationship of trust evolves.
4. Cultivate 'guanxi'
The logical development of tight relationships is the Chinese concept of guanxi, pronounced gwan shee. According to business analyst Tim Ambler of the London Business School, the kernel of guanxi is doing business through value-laden relationships. In a very centralised, bureaucratic state, the use of personal contacts was the only way to get things done. Guanxi is the counterpart of a commercial legal system. Where the latter is relatively weak, as in China, the need to rely on guanxi will be strong. As long as the partnership is more significant than the transaction, it is logical to honour it. The thought of a relationship leading to business is . But Easterners who are familiar with guanxi are more cautious than Foreign converts. The accountability of guanxi are very real. In the incorrect place, at an inappropriate time, with unsuitable people, the obligations can become a trap that is hard to escape.
5. Exhibit extra caution with contracts
Chinese and Westerners often approach a transaction from different ends. To a Westerner, starting with a standard contract, changing it to fit the different circumstances, and signing the revised version, seems fine. Commercial law is built intoour thinking. But traditionally, commercial law rarely existed in China and certainly indicated bad faith. The early appearance of a draft legal contract was seen as inappropriate or, more likely, irrelevant, because it carried no hint of commitment. The business statements might form a useful agenda, but obligations came from partnerships, not pieces of paper. Today, returning home with a signed piece of paper is a symbol of progress, but that is all. The Chinese may be signing a contract to humour their guests. To them, a completed contract may merely be the proof that both sides have become close enough to develop a trusting partnership. Further concessions may then be requested - a difficult prospect for the Westerner who has reduced his margin down to barely.
Foreign business visitors are often deadline-driven and unwilling to slow down to the Chinese pace when discussing business. But in China the pace can be quick and slow at the same time. Those involved in negotiations know how long they can drag on when the Chinese side is consulting internally or has other reasons for delay. But Chinese negotiators can move with great speed on other occasions. Part of this feeling is subjective. Any chess player knows how long you have to wait for the other player and yet how fast you must move yourself. Nevertheless, Chinese negotiators use time more consciously than their Western counterparts.
2. Understand to separate fact from fiction
Almost everything you hear about China is correct, and so is the opposite. Western thought is centred around linear logic whereas Chinese thinking is influenced by early philosophers, who saw a paradoxical balance of opposites in all circumstances. Where Westerners tend to look for exact alternatives (option A instead of option B), the Chinese may examine ways to combine both option A and option B. This difference in approach may make a foreigner think that a Chinese negotiator is being implausible, evasive or devious, when they believe they are actually being straightforward.
3. Build relationships
Foreigners generally build transactions and, if they're successful, a partnership results. However, the Chinese believe that prospective business partners should build a relationship first and, if successful, commercial arrangements will . This difference underlies many misunderstandings arising from business negotiations. Almost all successful transactions in China result from careful cultivation of the Chinese partner by the foreign one, until a relationship of trust evolves.
4. Cultivate 'guanxi'
The logical development of tight relationships is the Chinese concept of guanxi, pronounced gwan shee. According to business analyst Tim Ambler of the London Business School, the kernel of guanxi is doing business through value-laden relationships. In a very centralised, bureaucratic state, the use of personal contacts was the only way to get things done. Guanxi is the counterpart of a commercial legal system. Where the latter is relatively weak, as in China, the need to rely on guanxi will be strong. As long as the partnership is more significant than the transaction, it is logical to honour it. The thought of a relationship leading to business is . But Easterners who are familiar with guanxi are more cautious than Foreign converts. The accountability of guanxi are very real. In the incorrect place, at an inappropriate time, with unsuitable people, the obligations can become a trap that is hard to escape.
5. Exhibit extra caution with contracts
Chinese and Westerners often approach a transaction from different ends. To a Westerner, starting with a standard contract, changing it to fit the different circumstances, and signing the revised version, seems fine. Commercial law is built intoour thinking. But traditionally, commercial law rarely existed in China and certainly indicated bad faith. The early appearance of a draft legal contract was seen as inappropriate or, more likely, irrelevant, because it carried no hint of commitment. The business statements might form a useful agenda, but obligations came from partnerships, not pieces of paper. Today, returning home with a signed piece of paper is a symbol of progress, but that is all. The Chinese may be signing a contract to humour their guests. To them, a completed contract may merely be the proof that both sides have become close enough to develop a trusting partnership. Further concessions may then be requested - a difficult prospect for the Westerner who has reduced his margin down to barely.
6. Mobilise local assets
The challenge of learning to speak Chinese fluently, the complexities of the Chinese way of doing business, and a strong sense of patriotism mean that a foreigner will only rarely be acknowledged by Chinese interlocutors on equal terms. The solution is to find a reliable local ally to work with you. An effective Chinese colleague will be able to analyse body language at meetings, work out who in the other negotiating team holds real power - not always the boss - and assist to smooth out any inadvertent issues. Conversely, the presence of a foreigner should be exploited to the full. Chinese interlocutors will often see a visit by a foreigner as an indication of sincerity and commitment by the Foreign business. Perversely, they often do not accord mainland Chinese or Hong Kong representatives the same status as a foreigner. The perfect sales team, therefore, is usually a local to take care of the working level contacts, and a foreigner to do honour to the higher echelons.
7. Respect face
Face is an important component of the Chinese national psyche. Possessing face means having a great status in the eyes of one's peers, and is a gauge of personal dignity. The Chinese are very sensitive to acquiring and maintaining face in all parts of social and business life. Face is a valued commodity which can be given, lost, taken away or earned. Causing someone to lose face could ruin business prospects or even invite recrimination. The quickest way to have someone to lose face is to put-down an individual or criticise them in front of others. Foreigners can accidentally insult Chinese by making fun of them in a joking way. Another error can be to treat someone as a subordinate when their status in an organisation is high. Just as face can be lost, it can also be given by complementing someone for great work before their colleagues. Giving face earns respect and loyalty, but praise should be used rarely. Over-use suggests insincerity on the part of the giver.
8. the pecking order
Mao Zedong's thoughts on discipline published in 1966 give a valuable view into structures which exist in Chinese organisations even now: "The individual is subordinate to the organisation. The minority is subordinate to the majority. The lower level is subordinate to the higher level." This quotation, which underlies the way China was governed for over 2 decades, why Chinese society and organisations are very hierarchically organised, and why Chinese people seem to be more group oriented than individualistic and often do not like to take ownership. Similarly, people are seldom willing to give an opinion before their collegues as it might cause loss of face with a trusted ally.
9. Know the tricks of the trade
Eastern negotiators are shrewd and use a wide variety of bargaining tactics. The following are just a couple of the more common strategies:
- Controlling the meeting area and schedule
The Chinese know that foreigners who have traveled the great distance to China will be to go home with nothing. Putting pressure on foreigners just before their planned return can often bring useful benefits to the Chinese side.
- Threatening to do business somewhere else
Foreign negotiators may be pressured into making allowances when the Chinese side threatens to approach rival firms if their demands aren't met.
- Using friendship to extract allowances
As soon as both parties have met, the local side may remind the foreigners that true friends would come to an agreement of high mutual benefit. Make sure that the pay off is in reality mutual and not just one-way.
- Showing your anger
Despite the Confucian aversion to displays of anger, the Chinese side may put on a show of deliberate anger to put pressure on the foreign party, who could be afraid of missing out on the contract.
- Attrition
Chinese negotiators are patient and can draw out discussions in order to ground their interlocutors down. Excessive hospitality the day before discussions can be another variation on this theme.
10. Play the game yourself
Foreign negotiators dealing with Chinese could find some of the following tactics successful:
- Be totallly prepared
At best one individual of the foreign team should have a thorough understanding of every part of the business arrangement. Be ready to give a long and all-inclusive presentation, taking into account not to give sensitive technological information before you arrive at a full agreement.
- Play off competitors
If the going gets hard, you may let the local side know that they are not the only manufacturer {in the are area. Competition between Chinese producers is increasing. There may be other sources in the country for what your counterpart has to offer.
- Don't rush
Easterners generally believe that Westerners are always in a rush, and they may try to get you to sign an arrangement before you have adequate time to go over the details.
- Be prepared to deal with your losses and go home
Let the Eastern side know that failure to agree is an possible alternative to making a negative deal.
- Cover every aspect of an agreement before you commit to it
Talk over the whole agreement with the Chinese side. Make sure that your interpretations are consistent and that everyone understands their duties and obligations.
11. Get expert advice
Often, strong enthusiasm to deal with the Chinese replaces normal due diligence that would be expected before committing. Too frequently, Australian companies try to negotiate with local distributors, wholesalers, joint ventures and manufacturers, and get what they believe are good trading terms, only to find out things aren't what they seemed. Communication is the key to avoiding this, and if you don't you have quality representation in China, you will find this difficult.
The challenge of learning to speak Chinese fluently, the complexities of the Chinese way of doing business, and a strong sense of patriotism mean that a foreigner will only rarely be acknowledged by Chinese interlocutors on equal terms. The solution is to find a reliable local ally to work with you. An effective Chinese colleague will be able to analyse body language at meetings, work out who in the other negotiating team holds real power - not always the boss - and assist to smooth out any inadvertent issues. Conversely, the presence of a foreigner should be exploited to the full. Chinese interlocutors will often see a visit by a foreigner as an indication of sincerity and commitment by the Foreign business. Perversely, they often do not accord mainland Chinese or Hong Kong representatives the same status as a foreigner. The perfect sales team, therefore, is usually a local to take care of the working level contacts, and a foreigner to do honour to the higher echelons.
7. Respect face
Face is an important component of the Chinese national psyche. Possessing face means having a great status in the eyes of one's peers, and is a gauge of personal dignity. The Chinese are very sensitive to acquiring and maintaining face in all parts of social and business life. Face is a valued commodity which can be given, lost, taken away or earned. Causing someone to lose face could ruin business prospects or even invite recrimination. The quickest way to have someone to lose face is to put-down an individual or criticise them in front of others. Foreigners can accidentally insult Chinese by making fun of them in a joking way. Another error can be to treat someone as a subordinate when their status in an organisation is high. Just as face can be lost, it can also be given by complementing someone for great work before their colleagues. Giving face earns respect and loyalty, but praise should be used rarely. Over-use suggests insincerity on the part of the giver.
8. the pecking order
Mao Zedong's thoughts on discipline published in 1966 give a valuable view into structures which exist in Chinese organisations even now: "The individual is subordinate to the organisation. The minority is subordinate to the majority. The lower level is subordinate to the higher level." This quotation, which underlies the way China was governed for over 2 decades, why Chinese society and organisations are very hierarchically organised, and why Chinese people seem to be more group oriented than individualistic and often do not like to take ownership. Similarly, people are seldom willing to give an opinion before their collegues as it might cause loss of face with a trusted ally.
9. Know the tricks of the trade
Eastern negotiators are shrewd and use a wide variety of bargaining tactics. The following are just a couple of the more common strategies:
- Controlling the meeting area and schedule
The Chinese know that foreigners who have traveled the great distance to China will be to go home with nothing. Putting pressure on foreigners just before their planned return can often bring useful benefits to the Chinese side.
- Threatening to do business somewhere else
Foreign negotiators may be pressured into making allowances when the Chinese side threatens to approach rival firms if their demands aren't met.
- Using friendship to extract allowances
As soon as both parties have met, the local side may remind the foreigners that true friends would come to an agreement of high mutual benefit. Make sure that the pay off is in reality mutual and not just one-way.
- Showing your anger
Despite the Confucian aversion to displays of anger, the Chinese side may put on a show of deliberate anger to put pressure on the foreign party, who could be afraid of missing out on the contract.
- Attrition
Chinese negotiators are patient and can draw out discussions in order to ground their interlocutors down. Excessive hospitality the day before discussions can be another variation on this theme.
10. Play the game yourself
Foreign negotiators dealing with Chinese could find some of the following tactics successful:
- Be totallly prepared
At best one individual of the foreign team should have a thorough understanding of every part of the business arrangement. Be ready to give a long and all-inclusive presentation, taking into account not to give sensitive technological information before you arrive at a full agreement.
- Play off competitors
If the going gets hard, you may let the local side know that they are not the only manufacturer {in the are area. Competition between Chinese producers is increasing. There may be other sources in the country for what your counterpart has to offer.
- Don't rush
Easterners generally believe that Westerners are always in a rush, and they may try to get you to sign an arrangement before you have adequate time to go over the details.
- Be prepared to deal with your losses and go home
Let the Eastern side know that failure to agree is an possible alternative to making a negative deal.
- Cover every aspect of an agreement before you commit to it
Talk over the whole agreement with the Chinese side. Make sure that your interpretations are consistent and that everyone understands their duties and obligations.
11. Get expert advice
Often, strong enthusiasm to deal with the Chinese replaces normal due diligence that would be expected before committing. Too frequently, Australian companies try to negotiate with local distributors, wholesalers, joint ventures and manufacturers, and get what they believe are good trading terms, only to find out things aren't what they seemed. Communication is the key to avoiding this, and if you don't you have quality representation in China, you will find this difficult.
How To Import From China
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