Commercial negotiations with Chinese enterprises are an integral part of many Western business ventures. China’s strong economy and competitive market is attractive and a part of progressive business development strategies for many Western entrepreneurs. In this climate, it is crucial that when venturing into China with business aspirations, or entering into commercial negotiations with Chinese enterprises outside of China, one has an appreciation of the cultural nuances and expectations that permeate business dealings and social interaction alike. The Chinese market is not as open to foreign negotiation as it was in the 1990s and early 2000s. The government’s focus seems to have shifted, with the maturity of its business sectors, to cultivate national industry with policies and regulatory processes that favour local companies. .

Many Westerners are unaware of the messages they inadvertently convey through their conduct in business dealings. A thorough understanding of cultural mores, business etiquette and meeting protocol is essential to maximise the potential of an arranged meeting, and establish successful business relationships with China. The most promising deal can be compromised by misunderstanding and unintentional offence, so do not enter a negotiation without this arsenal of useful tips and pointers on doing business with China.

Key concepts: guanxi,respect, status and face

These four interrelated concepts underlie Chinese culture and dictate the rules of relationships, both personal and business.

Guanxi can be simply translated as ‘relationship’, and describes the emphasis placed in Chinese culture on the development of trust, rapport and relationships. Business is not undertaken in an impersonal, purely contractual basis in China. In the absence of a legal system that provides transparent independent legal remedies, it is imperative that you have a deeper understanding of your potential business partner’s position and impetus. Never attempt to do business with a party in China without first developing guanxi. Gaining an introduction through a third party contact or referral can be instrumental in developing guanxi.

Respect is a vital part of Chinese culture, and the giving and showing of respect is central to all relationships. Chinese people have a strong generational hierarchy, which transpires into a strong respect for commercial and organisational hierarchy also. Great respect and honour is shown to those who have reached advanced age. Respect is also gained through achieving success and gaining status.

Status is also a key consideration as it influences the way in which Chinese people interact with you in accordance with their culture. It is important for Chinese business people to understand your status or seniority. This should always be clearly enunciated. In addressing or introducing acquaintances it is appropriate to refer to the individual’s title, such as Chairman or Director, and begin introductions with reference to the most senior or highly ranked person first.

Familiarity with the concept of “face” will assist greatly in comprehending certain Chinese behaviours and responses. Face is a multifaceted word, generally referring to one’s reputation, honour and the outward impression one’s actions will give others. Preservation of face is of primary importance in Chinese culture and accounts for many aspects of relational interaction. Face is lost, among other ways, through the exposure of poor conduct or inadequacy (with the exposure rather than the conduct leading to the loss of face), and through being insulted or shown disrespect, especially in public. Face is gained through the receipt of respect and compliments from others directly or to a third party, and through the promotion of group harmony. Face is increased through age and experience, as exemplified by the respect shown to those who are older and of high status.

Demeanour

Displays of emotion (for example anger or frustration) are not common in Chinese culture, and Chinese people pride themselves on decorum and maintenance of composure. Formal interaction, especially on first meeting, is expected and shows respect. It is not appropriate to be prematurely informal, and attempts at jocularity and humour may indicate disrespect on your part and will not be appreciated.

Introductions should be acknowledged with a simple, light handshake or nod of the head. Overly firm or vigorous handshakes can be construed as aggressive, as can other forms of physical contact such as a slap on the back. Refrain from engaging in physical contact and respect personal space.

Exchange of business cards

The exchange of business cards is important (some may say essential) in China, as it is a way of demonstrating status. Your business card should have your position or title clearly stated on it. It is a good idea to have the reverse side of your card translated into Chinese. Gold is considered to be a very prestigious colour, so gold embossed cards will give an impression of high status.

Business cards should be proffered with both hands and with the Chinese translation facing upwards. Others’ business cards should also be received with both hands, and should be carefully perused on receipt. Placing business cards away immediately without reading them is a sign of disrespect, and it is best to put them into a card case rather than directly into your pocket.

Meetings

Punctuality is a key sign of respect and is highly valued. Endeavour to always be early for meetings and appointments as they will generally start promptly. In bigger cities, allowance for traffic issues is understood but ring ahead if you are going to be late.

It is very important to wait for your host to welcome you. Their welcome speech may be long and it is very rude to interrupt. Your host will generally signal when he is finished and it is appropriate for you to speak. Ideally, you would then thank your host for the invitation to meet and respond in a complimentary way to your host’s remarks.

Business dealings in China often continue over a meal. Taking part in culinary rituals is another way of building the trust and rapport that is essential to successful business relations in China. The pace is unhurried and negotiations begin after a time of small talk and social engagement. Negotiations often take place simultaneously with the food being served and eaten, unlike in Western cultures where a meal is often a precursor or subsequent to negotiations.

Seating arrangements for a Chinese business meal are predetermined in accordance with personal importance, reflecting the focus on status and seniority. The most important guest or the host will occupy the seat of honour, facing the entrance or the most easterly position, and others will be seated according to seniority. If the table is circular, the second, fourth, sixth and so on most important guests will be seated to the left of the place of honour, and the third, fifth, seventh and so on will be seated to the right of place of honour, until the least important guests meet in the middle on the opposite side, nearest to the entrance. This is a very important aspect of a formal meal and can be used to demonstrate respect for the other party by offering a favourable seating position.

During meals, it is impolite to begin eating or drinking until your host has done so. You should try everything that is offered to you but eat modest quantities. On occasion, large quantities of alcohol are consumed when business takes place over a meal. A guest will save face by accepting drinks offered by the host . It is diligent to be mindful of this and you may be able to minimise harm by claiming illness or another relevant excuse. Wine is often used for toasting.

It is essential that in making small talk and conversing with Chinese people certain taboo topics are avoided. Steer clear of political discussion, particularly current government policies and leadership. Taiwan is also a sensitive topic that should be avoided. Tensions between China and Japan remain, thus it is unwise to express affinity with the Japanese as this may be interpreted as a disregard for the Chinese point of view.

Negotiation style

Chinese business people are renowned for being shrewd and tenacious negotiators whilst being unfailingly polite. It can be quite difficult to adjust to their negotiation style.

Chinese business negotiators will often present with an initial display of vulnerability. This can be a strategic approach to secure concessions from you. Making concessions that may be considered by others to be unnecessary is associated with loss of face. Chinese negotiators will seek to avoid making concessions whilst seeking the most possible concessions from you. Ensure you enter a negotiation with a clear strategy and knowledge of what you are willing to concede.

It is becoming increasingly common, especially in the major commercial centres, for negotiations to take place in Chinese. It is essential that you engage a translator, preferably a lawyer or someone with relevant technical knowledge, to eliminate any misinterpretation due to language barriers.

Saying ‘no’ in China is also linked to loss of face, which must be avoided at all costs. Denials on your part should be carefully expressed and avoided as far as possible, to preserve face. One strategy is to use language such as ‘we could look into that’ rather than a direct rejection. The flip side of this is that positive answers may be given by the Chinese without any true concessions being intended. It is critical that these apparent concessions be explored and verified through polite questioning.

Negotiation can take considerable time and be punctuated by significant pauses. This is part of the process and must be endured – be patient and resist the urge to speak to fill gaps in the conversation. Displays of frustration and impatience give a poor impression and are considered unprofessional. Successful negotiation requires a delicate balance of determination and diplomacy.

In short

Diligent research into the strengths, weaknesses and unique characteristics of a potential business associate should be routine when entering any negotiation. As Chinese cultural nuances are so intrinsically linked to business behaviour and expectations, gaining an appreciation of them should simply be a part of the ordinary, due diligence process. The breadth of the features that distinguish Chinese business culture and etiquette from our own may seem daunting. However, mastering just a few of the examples of Chinese business protocols mentioned above will go a long way in minimising cross cultural challenges and optimising your potential when doing business with China.