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What not to do when negotiating with Chinese businesses

by Adam Gilbourne 

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China is a massive opportunity for many Australian businesses. It’s the largest economy in the world; it’s still growing rapidly and, equally rapidly, it is opening up to overseas investment.

But people who want to do business in China would also do well to remember that the country has a different culture and rules of etiquette. Relationship building is critical to being successful in China and, as such, it’s important to learn the dos and don’ts to successfully building and maintaining relationships with Chinese business partners.

Do’s

  • Learn some Mandarin or Cantonese (do your research so you know which of the two dominant Chinese languages is spoken in the area that you are looking to do business in; Cantonese is more dominant in south China, and Mandarin is more dominant in North and southwestern China). You don’t need to be proficient in the language (it’s likely the actual business will be done in English), but making the effort to learn some pleasantry will be appreciated as a sign of respect for your Chinese counterparts.
  • If English isn’t an option, invest in a good translator. Translation is not a matter of simply converting words from one language to another. A good translator will also recognise the tone and subtext to comments to rephrase them in a culturally sensitive manner. You don’t want to offend a potential business partner through a lost-in-translation situation.
  • Be prepared to take time to seal the deal. Chinese business is all about building relationships first, so the first couple of meetings will not accomplish a lot. Think of this as an opportunity to also learn about your potential business partner, and whether you do indeed want to work with them.
  • Expect some grandstanding. Chinese businesspeople will typically boast about government or supplier connections that they don’t actually have. Unless they can prove a statement they make, assume it is showboating and don’t allow it to factor in to your own analysis of a potential deal.
  • Recruit native Chinese people and consider setting up a small office in China to make your company look like a local one. Having “staff on the ground” in China who understand the business culture is the single most effective thing you can do to ensure that you develop the right connections and relationships to make inroads into the market.

Don’ts

    • Don’t try and hurry things. In most western countries we are used to decisive decisions and fast business. Trying to hurry negotiations in China will encourage them to think that you are being over-eager and that they have all the cards in the negotiation, which is not an ideal situation.
    • Forget to research the cultural differences between cultures. For example:
      • Pointing with the index finger is incredibly rude.
      • Don’t be a minute late for a meeting.

What we find inoffensive may well offend a Chinese person, and many potentially lucrative business partnerships have been lost because a businessperson forgot to visit a website of cultural etiquette or flick through a pocket guide on the country before visiting.

  • Don’t forget the business cards! Business cards are less vital in doing business in the west, but the exchange of cards is still an important formality in China. You should have special cards made that are printed in English on one side, and Chinese on the other (make sure that the Chinese side of the card is in simplified Chinese, rather than classical characters).
  • Don’t assume that a signed contract is binding, as it is in western cultures. To the Chinese a contract is considered to be a draft subject to change. Negotiations will likely continue after that contract has been signed.
  • Don’t allow yourself to get frustrated. Chinese business negotiations often involve demands being repeated over and over again, simply worded slightly differently, in order to try and wear the other side down. Remember, you’re going to need to take your time in order to get a mutually beneficial business relationship with a Chinese organisation, so prepare for that.
  • Don’t make the mistake of sending anyone but the executive in charge of the business a request for the initial meeting. Seniority and rank are incredibly important in Chinese business culture, so to represent how seriously you take the prospective partnership, it is a good idea that the CEO or director be in attendance for the first meeting. If you are hoping to do business with a corporation much larger than your own, then show appropriate deference (without compromising your negotiating position at the same time).

After the initial string of meetings, if you’ve handled negotiations well then you may well have formed your most lucrative business relationship. This could result in your business either gaining a foothold in the billion-strong Chinese market, or receiving the benefits of Chinese corporate resources back in your home country.

It’s not easy to form robust, mutually beneficial partnerships with Chinese suppliers and businesses, but it is an opportunity well worth considering if you want to take your business to the next level.


Adam Gilbourne is the founder of Easy Imex Ltd and helps importers to source product & manage their supply chain in China. He writes advice for importers on the Easy Imex blog. He lives full time in Shanghai, China. You can contact him at This email address is being protected from spambots. You need JavaScript enabled to view it..

 

 

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