Negotiation, China Vs. The West

0715_culture tellerNegotiation, China Vs. The West

Negotiating in China can be an exercise in frustration. They don’t give you the information you ask for. Or they give you information, but it’s wrong. Or they give you information, then change everything later. Despite the fact that they always seem to treat you in a very friendly manner at other times, their negotiations can get very adversarial.

There are several reasons for this. In some cases, there may be little that you can do other than be prepared; in other cases, there are steps that you can take to make things easier.
Negotiating in China is, obviously, different than in many Western cultures. Go to a market in China, and ask how much a particular jacket is. They’ll respond with something like, “It’s RMB 600, but I’ll sell it to you for only 500.” In western countries, it would be quite rare to begin negotiations by obviously asking for too much, and then offering a ‘discount.’ If the price is 500, then they’ll say it’s 500.

In China, it is done like this because there is the implicit expectation that the customer is going to ask for a discount. In fact, giving a discount gives face to the customer, and therefore they expect it. To refuse to give any discount means to refuse to give them face, and they may refuse to buy, even if the price is a very fair one.

I tested this out myself about 15 years ago, when I was working as a private English teacher. In some cases, I’d offer a price of RMB 200 per hour, with no room to negotiate. In other cases, I’d ask for RMB 350 per hour, then offer a discount to RMB 300, and then let them negotiate an even lower price.

So adjust your tactics a little.

The result? At RMB 200, with no willingness to negotiate, many students would say no. But by starting at RMB 350, then letting them negotiate downwards, I’d often get them to sign up at prices of RMB 225 to 250 per hour. The fact that they were able to negotiate discounts of RMB 100 per hour gave them face, and made them feel satisfied (even though they were, in fact, paying more than what they would have gotten with my ‘fair’ asking price).

The exact same thing happens in business all the time. Westerners come in and start by offering a ‘fair deal.’ One that leaves little or no room for negotiation. When the Chinese side tries to negotiate, they are just told, “Sorry, we can’t go any lower than this, this is our best price.”

Worse, the Chinese side can get very aggressive, pushing very hard for further concessions that you honestly cannot give, because you’ve already given them a fair deal. But instead of getting frustrated, think of it from their perspective. Their expectation is that anyone entering a negotiation will be automatically inflating prices, and keeping some things off the table, so that there is room to negotiate. So if you are refusing to negotiate and give them better terms, their interpretation is that you must be overcharging them, and refusing to give them face.

So adjust your tactics a little. Start off with a price that is higher than what you expect, then offer them a discount right away “because of our friendship.” Leave further room to negotiate more as the process continues. And expect that they are doing the same thing. So, it’s okay for you to also push for more.

And for our Chinese readers, yes, I know, not all Chinese do that. But it’s quite a common situation. And on your side, if you are doing business with Westerners, you can likewise seek to adjust your tactics. Many Westerners really appreciate it if, instead of long, complex negotiations, simply present a ‘fair’ contract, one that doesn’t need much negotiation.

And another tip for the expat crowd. Sometimes, when the Chinese side refuses to give information, or gives wrong information, it may simply indicate incompetence or dishonesty. But in other situations, it may be a stalling tactic, indicating that they expect you to offer more first. If you’ve already given them your ‘best price,’ and have no room to offer more, then you could be in trouble. But if you’ve left some wiggle room, you may be rather pleasantly surprised at how much clearer that information becomes as you show your willingness to negotiate with them, and give them face.

0415_culture teller2John Lombard has worked in China since 1993. For the last 15 years, he has trained multinational companies in cultural intelligence, was a consultant to the Beijing Olympic Committee, and has founded two companies and one NGO in China.

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