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The Art of Negotiation:
Five Basic Tactics For Doing Business in China

By Bill Quarless

Eight centuries ago, the Chinese military strategist Sun Tzu wrote, “If you know both yourself and your enemy, you can come out of hundreds of battles without danger.” That ancient wisdom still holds true today even though our opponents are more likely to be on the other side of a conference room table than a battlefield. It is especially true of business negotiations. Although not always adversarial, these engagements are often filled with potential dangers for the unprepared.

So it is perhaps ironic that I, an American doing business in China, have taken Sun Tzu’s message to heart and apply it regularly in my dealings with his descendants. You, too, can become a master strategist in this regard, and you can start by applying these basic tactics when negotiating with the Chinese.

Tactic #1: Prepare to be patient
Sun Tzu was wise to begin his famous quote with the admonition, “know … yourself.” Let’s say you’re the impatient type, someone who’s used to the American style of getting things done “yesterday, if not sooner.” If so, you need to be conscious of that weakness as you enter into business negotiations with the Chinese. That’s right: I call it a “weakness.” In China, business is a long courting process. Anyone who expects to get great results from a single meeting is going to be disappointed. The Chinese come from an ancient culture that took thousands of years to develop: They aren’t going to change their thinking just because you have a deadline. If you fail to keep that in mind, and let your impatience get the better of you, you will be at a distinct disadvantage.

Tactic #2: Approach with a trusted friend
Just because things take time in China doesn’t meant there aren’t shortcuts. In fact, I recommend using one particular shortcut – a zhongjian ren – if you are going to be meeting a new business contact for the first time. That phrase is best understood as “trusted friend,” someone who has already taken the time to build a relationship with your contact. In the Chinese culture, it’s possible for you to borrow his credibility. When he introduces you, he essentially vouches for you. And many times, an introduction from such a person is all that’s required to jumpstart a relationship.

Tactic #3: Socialize to build trust
Once you’re in, you should immediately start building your own guanxi – that is, the same sort of social capital your zhongjian ren used to get you started. Remember, there is no such thing as “just business” in China. You and your counterparts will need to get to know each other personally. The process of mixing business and friendship to build mutually beneficial relationships is the core of Chinese business. Guanxi is currency, and it is carefully cultivated over time. So how do you build guanxi? One way is to socialize with your business partners. That means dinner, drinks and, yes, karaoke. What may seem like “party time” to the inexperienced is really an opportunity for businessmen to observe the behavior of their potential partners in a relaxed setting. After all, few people can conceal their true nature after a few drinking games and silly songs.

Tactic #4: Give face to create goodwill
Looking inward again, self-control becomes even more important as you start to build your guanxi. It can be quickly erased by an ill-timed outburst of anger or frustration. In U.S. business negotiations, such outbursts are more forgivable and can even be an effective bargaining tool. But in China, losing your cool is one of the quickest ways to sour a negotiation. That’s because when you go off, your counterpart loses face, and face is everything. This principle, called mianzi, works in both directions. When you compliment your counterparts and sing their praises to superiors, you give them face – and that’s real capital you can cash in later. For instance, the Chinese might appreciate your need to save face with your boss in a given situation, and be more willing to accommodate you as a result.

Tactic #5: Emphasize your value
Doing business in China isn’t only about personal relationships and emotions. There’s also a hard business case for every transaction, and getting the best price may very well depend on your perceived business value. That’s why it’s critical to emphasize that value early and often. For example, if you are negotiating with a factory to make a consumer product that will eventually be sold at Wal-Mart, say so! You may just go from fourth in line to the top priority. Many businessmen underestimate the value of selling themselves to the Chinese. But exciting people and showing them the power of your clients can heavily influence pricing, speed, attention to quality and enthusiasm for your business.

It takes years of hands-on experience to master the intricacies of China business, but employing these five basic tactics is a great start.

Bill Quarless, a former United States Marine, is president and CEO of Impact Products Ltd., a firm specializing in China manufacturing and production management. He lives in Hong Kong and can be reached at (852) 2139-3961, via e-mail at bill@impactproducts.com  or online at www.ImpactProducts.com.

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