Eva Li.

Negotiating with Chinese





Aleksandr Dyakov


Eva Li,2017

Aleksandr Dyakov, ,2017


ISBN978-5-4483-9274-0

Ridero

Astrict guide toeffective negotiation with the Chinese

Introduction

Ihave some good news and some bad news.

Sticking totradition, Ill start with the bad news. You have lost at everything. Whether it is working, negotiating or doing business with the Chinese, you have lost at everything, bydefinition.

The good news is, Iwill help you win thiswar.

Whyme?

Because it was Iwho took the risk ofleaving everything behind with aless then mediocre command ofChinese and going toChina with aone-way ticket and $300inmy pocket. Ihad nothing there: no friends, no place tolive and no job. Moreover, everything Iknew about the Chinese was limited tomy university lectures. Ihad no other choice but tomake arrangements with the Chinese intheir language. And Idid agoodjob.

Iacquired all my knowledge, skills and capabilities inthe field, rather than inside acomfortable office. And, bythe way, Iwas speaking fluent Chinese within amonth.

Why not them?

People who major inChinese usually become translators, guides, teachers or FEA managers. None ofthem learn how tosurvive among the Chinese incombat mode. Ido, however, respect all ofthe above mentioned occupations.

Numerous articles have been written on how tonegotiate with the Chinese, but, weirdly enough, they all repeat one another and speak from aWesterners point ofview. The Chinese are different. Completely. But not asingle article givesus the actual picture. They mostly use general words and formulas, which do not work inpractice. Ilearned this from firsthand experience, and more than once. For instance, not asingle article will tell you athing about the psychological age ofthe Chinese, or why, from ahistorical standpoint, their behavior seems so strange, inconsistent and unusual tous. Not aword. Not even ahint.

Negotiating with and thinking like the Chinese, reading their minds, doing business with them, choosing the right approach toworking with them and making them play bymy rules are the skills Iacquired not at auniversity desk, but inreal life. True, we learned alot from our university lectures, but they never taughtus how toapply this information inreal life. So, Ilearned on my own. After graduation, I, like most ofmy schoolmates, had two main options: either finding ajob as atranslator or guide or purchasing agent, or going toChina tocontinue studying. But Ichose athird option. Isimply went toChina with no particular plan, tolearn about the Chinese intheir natural habitat.

It was only later that Ienrolled inuniversity inBeijing, having got toknow the Chinese from the inside and having discovered them for what they really are.

Istudied for ayear and Iwent towork with agood understanding ofhow todeal with the Chinese.

Many people who work with the Chinese often ask me, Why do they act the way they do and what can we do about it? Ihave often seen Western executives stall negotiations with their Chinese partners or agree tounfavorable terms (e.g. quality, deadlines, payments, etc.). When Ihear such stories, Icant help but wonder why it happens. Then again, some things that Ifind obvious are not as obvious toothers.

Icame up with this course after two incidents, which happened around the same time. These are the stories Iwould like tobegin my course with, as they illustrate very well the essence ofnegotiating with the Dragon.

One ofthe stories happened tome and the other toacolleague ofmine named Denis. We were doing business with two different Chinese companies, Leon and Electron respectively (all the names have been changed). We negotiated on different terms and ended up with different results: the price Iwas topay was reduced from USD 7.15toUSD 6and Deniss was raised from USD 64toUSD75.

The backstory goes like this. Leon charged me with USD 7.15and refused point blank togo any lower. They said things like we shall not discuss this any further, we are incurring major losses, we have raised the wage ofour employees and production costs have grown, which are typical Chinese excuses when they want toclose the deal. Ibelieve many ofyou have come across such bargaining. And you probably agreed tothe terms and the high prices.

Meanwhile, Electron charged Denis with USD 64(he was buying adifferent product), sent an invoice and refused tolower the price making pretty much the same excuses.

Then the day arrived. We had both wanted amarkdown on our respective products, but bythe end ofthe day, we had two very different outcomes: Iwas topay only USD 6and Denis USD75.

Electron explained that the price increase came from the firms new management team that had anew vision and policy for the company.

Electron was able topull this off, because:

1. Denis did not speak Chinese (negotiations were held inEnglish);

2. Denis was unfamiliar with the Chinese mentality;

3. Denis was unfamiliar with the way the Chinese think;

4. Denis did not know how touse Chinese cultural specifics tohis advantage;

5. Unfortunately, Denis lacked strength ofcharacter (Iwill explain why this is important inChapter3).


So, why did Leon ultimately quote alower price, even though they had refused so much as todiscuss the matter?

You will find the answer inthis course.

Iwill help you learn about the Chinese and what they are like, what hides behind their fixed gaze, what kind ofperson you should have as your negotiator, and, finally, what mistakes you should not make when negotiating and how toavoid them. You will learn how tomake the Chinese play bythe rules. Your rules.

Chapter 1. The Chinese. Who are they?

This chapter is about the Chinese mentality and outlook. We shall also look through some key notions that are essential for effective negotiations.

Ethnocentrism

For awhile, the Chinese were cut off from the rest ofthe world (China is surrounded bymountains and sea). They were also more advanced than other peoples were at the time. So, it is no surprise that the Chinese thought themselves superior toand better than anyone else. Inother words, they believed tobe the center ofthe world. The Chinese believed they were the only society worth studying and so did not bother toexplore their neighboring lands, which, as they believed, were inhabited exclusively bybarbarians. This is where ethnocentrism comes from, as well as the countrys name, ??, or Middle Nation.

Ancient Chinese maps locate the country inthe center ofthe world, too. Even when the Europeans came toChina, they had toplace it inthe center oftheir maps, toavoid displeasing the emperor.

Certain oftheir moral and ideological superiority over all other peoples, the Chinese found it hard tolearn new things, which is why the country retained many ancient features until the 19century.

Nevertheless, they were able tolearn from the West, adopt its best practices, adjust them totheir needs and thus evolve even further, nourishing the belief that they were the superior nation.

They keep proving it today,too:

1. Almost every country has transferred its production toChina;

2. The Chinese can copy anything you show them, but cheaper;

3. The Chinese still believe they are superior toevery nation inthe world and they still see everyone else as barbarians.

Keep this inmind at all times when you do business with the Chinese. From their point ofview, you are abarbarian, aprimitive being, meaning they can and will deceive you and can and will break all verbal and written contracts (we will return tothe specifics ofthe term contract later). When negotiating with Chinese suppliers, remember this: they will never see you as an equal; you will never be one ofthem; they will always be thinking ofways toprofit at your expense.

This is why you have tobe alert. You can kid yourself all you want, but do not expect equality when it comes tothe Chinese, ever. Consider this or do notwork with them at all. Period.

Continuity

Iwas the only one inmy year toattend lectures on ancient Chinese literature. This was my schoolmates Unforgivable Mistake#1.

What do some boring old books written before the Common Era have todo with our topic, you ask? This literature course and, more importantly, my impeccable knowledge ofthe ancient Chinese writings from the university booklist helped me reduce the price from USD 7.5toUSD6.

This ultimate figure yielded an annual profit ofUSD 115,000against USD 57,500(given the USD 7,15price). As you can see, the difference is dramatic. Ever since 2009, Ihave been hearing all kinds ofpeople, including orientalists, say, Whats the point inreading some ancient books? They are obsolete. This is Unforgivable Mistake #2. There is only one good reason toread these books: they are still relevant inChina.

China, ofcourse, is not the oldest civilization, but it is atruly remarkable country, which has been enjoying acontinued existence for afew thousand years now. China has preserved its foundation, or matrix. The main indicator is the continuity ofits history, with only some minor gaps. None ofthe existing countries can say the same about themselves.

Chinas age is still amatter ofdispute. We shall use the classic 5,000years mark. It means that the Chinese culture has existed, uninterrupted, for that long. Since history and archeology are among the most important subjects inChinese schools, any regular Chinese person knows their history from the very beginning ofthe Chinese civilization. This entails aplain truth, ignoring which is one ofthe most unforgivable negotiation mistakes: things that were relevant inChina 5,000years ago are still relevant today!

This is why all those ancient books are still very important. The Chinese carry their wisdom intheir genes and apply them inpresent-day business matters. Knowing the ideas and principles written down inthese books is amajor competitive advantage over both your competitors and the Chinese.

The West has come torealize this already, and the success ofthose who rely on these books intheir negotiations with the Dragon is hard toignore. Thanks totheir knowledge, firms rush tothe top oftheir segments.

Which books am Italking about? No, Iam not forcing you tostudy the entire Four Books and Five Classics ofConfucianism, although it would not hurt.

First ofall, it is worth reading The Art ofWar and The Thirty-Six Stratagems. Even though these books are dedicated towar strategy, they explain very well the Chinese manner ofnegotiation. The Chinese study them while they are still inschool and apply the principles with great skill both inbusiness and inmatters oflove (more on that inChapter2).

Remember: things that were relevant inChina 5,000years ago are still relevant today!

Do not make Unforgivable Mistakes.

Traditionalism

Traditionalism is very strong inthe Chinese culture; it even survives revolutions. It is growing even stronger these days amid Chinas Confucian socialism. Various norms, rules, and principles comprise the Chineses historical memory code, which has remained intact for 150years. This is the main distinguishing feature ofthe Chinese culture. As aresult, ancient Chinese traditions are very much alive inmodern China. The Chinese still abide bythe same rules and norms they followed many yearsago.

China can digest anything. It digested the Mongols, who invaded China and established the Yuan dynasty, and it digested the Manchus, who also invaded the country and established the Qing dynasty, but inthe end, both dynasties are considered the most Chinese ofall. Moreover, China even digested the West and communism. It is no coincidence that sinologists unofficially regard Chinas communist party as yet another dynasty.

The patterns ofbehavior, thinking, and outlook, which were established before Confucius and were later cultivated byhim, are clearly traceable intodays interpersonal relationships, business matters and negotiations. The most important thing for Chinese employees is laoban their boss, director, i.e. the person incharge. He is their emperor. Whatever he says should be done, will be done. Regular clerks are 100% subordinate tohim and fulfill all his orders. Even if you get hold ofhis contact information (which is highly unlikely), you will not be able toreach him. His employees will carefully protect his peace.

At the negotiation table he is mostly silent, listening attentively and paying attention toeverything. He is unlikely toaddress you directly, and he will probably tell the negotiator what tosay on his behalf.

Decisions are also made only bythe laoban. This is why it is important todevelop guanxi, or connections with him (more on that inchapter 2), so that he knows you inperson and has an understanding ofwho you are. This connection helps ease the negotiation process, among other things.

Seek out the laoban or get ready for some lengthy negotiations.

Conformism

Conformism is compliance with acertain set ofrules or norms, and atendency tostay within their margins. Every kind ofrelationship is regulated, whether inside the family or between the sexes, co-workers, holidaymakers, friends and neighbors.

Conformism caused me alot oftrouble when Ileft everything behind and arrived inChina for the first time. The Chinese largely rely on template thinking and on stereotypes, so if anything outside the template occurs, they usually find it extremely unsettling. Flustered and at aloss, they do not know what todo and how todeal with whatever the issueis.

Want toget anew credit card? Youll have towait for 2hours. Want totransfer some money via Western Union? Youll have towait for 2hours. Want toextend your visa? Again, 2hours.

Two vivid examples come tomind.

Iwent toabank once toopen aChinese account. The teller, aChinese woman, took my passport and, without checking with me first, scanned my Schengen visa, thinking it was the main page with all the data she needed. Then she pointed at the words Schengen Visa, written inRoman characters, and asked me, which ofthe two words was my given name and which was my surname.

Another time, Iwas extending my visa at avisa center. AChinese clerk took my passport tocopy my details into his computer, when he almost literally froze over my date ofbirth, because Chinese dates go like this: year, month, date.

Tomake things worse, helping aChinese person insuch acase is out ofthe question, or else they will lose face, closing the door on any further cooperation.

So, if you want something from aChinese supplier, do not use words; simply send them arelevant picture, blueprint, video,etc.

If you still need toexplain something, keep it simple, very simple, perhaps even split it into several parts, and byall means send apicture, ascheme, anything with concrete figures. Do not, however, forget toexplain these figures inthe letter, keeping it as simple as possible, and the Chinese will most certainly understandyou.

Do not load them with several unrelated questions. Stick toone question, one topic, and one letter. This will help avoid any confusion. True, it is hard. But it will be much harder tosort out awhole shipping container ofdamaged goods, because the Chinese misunderstood something and did everything according totheir usual template. Remember that the Chinese think stereotypically, which means the following: you are abarbarian; the best things inthe world are Chinese; it is possible todeceive you; they do everything the way they are used to; making changes requires additional thinking, which is tiresome, so it is easier tosay, We cant do it. Also, always verify and re-verify what theysay.

Interaction with the outside world

All civilizations outlived the stage ofethnocentrism, but they either disappeared or changed their opinion along with the worlds geopolitical development, which is why ethnocentrism became obsolete. It is, however, still alive inChina. There are three reasons forit.

1. Geography.

China takes up most ofAsia. As Ihave already mentioned, China is geographically isolated from the rest ofthe world (mountains, sea, desert), which is why the Chinese stewed intheir own juice for along time, so tospeak.

2. Ideology

InChina, the difference between aChinese and abarbarian has always been highlighted. The Great Wall ofChina is amaterial manifestation ofthe us and them distinction.

3. Level ofdevelopment

Chinas cultural level was much more advanced compared tomany other Oriental lands both inancient and medieval times.

All this led the Chinese tothink ofthemselves as the Middle Nation, the only cultured and developed country inthe world, surrounded bysavages and barbarians who need tobe civilized.

Chinas mission was toestablish and maintain abalance between all things and people. This is where the notion ofSinosphere is derived from, which was tobe accepted byall non-Chinese peoples. China, however, never intended toconquer anyone. The barbarians were supposed tosee the beauty ofthe Chinese culture, torecognize it as the only true one and toaccept it willingly as theirown.

There were three types ofbarbarians. The first one included Chinas immediate neighbors (Korea, Japan, and Vietnam). The second consisted ofnomadic and seminomadic Asian tribes, who sometimes paid tribute toChinese rulers. The third type comprised the rest ofthe world, or the so-called remote barbarians, includingus.

Chinas attitude towards the barbarians was similar tothat ofsenior tominor, or lord tovassal. They still have avery clear distinction between Chinese and barbarian. Bydefinition, they do not seeus as cultured, exalted beings, and they initially do not considerus as equals. This is why upsetting the arrangements made withus, barbarians, is fine with them.

Chinese people still believe that if aday goes bywithout tricking at least one foreigner, this day is awaste. As aresult, they chargeus higher prices than they do their fellow Chinese. They will never respectus the way they do each other.

If you have been toChina, especially insmaller cities, you may have noticed the Chinese blatantly pointing their finger at you, or taking pictures, or shouting something inyour direction. This is because you were some sort ofexotic animal they had never seen before. They have always treated barbarians like this, and it is likely they always will.

This tendency is often noticeable during negotiations. If you use English tonegotiate, they will quote ahigher price than they would if you spoke Chinese. Plus, if you speak their language, they will see you inatotally different light. Your Chinese language skills will not make you their equal, but they will transform you into aproximate kind ofbarbarian, who has accepted China as the best culture inthe world and is doing all he or she can tobecome civilized. Moreover, if aperson knows not only the language, but also the Chinese negotiation technique, his or her success can be tremendous.

So, toopen the gates toChina, you have toaccept that you are abarbarian and asavage willing tobecome acivilized person with the help ofthe Chinese culture.

Associative thinking

As Ihave mentioned earlier, the Chinese rely on stereotypes, templates, patterns, and analogies. It is aclear manifestation ofthe Chinese mentality and their associative thinking. There are two reasons for this.

1. Characters

Psychologists say that Far Eastern countries have aspecial kind ofthinking, formed bythe use ofcharacters. One character contains 500times the information asingle Roman or Cyrillic letter does.

2. Ancestor worship, which Confucius cultivated and strengthened inthe minds ofthe Chinese. Ancestor veneration also refers tothe ideals ofconduct and thinking, which were followed inthe past. These ideals are tobe followed inthe present as well, no changes applied, because all the best is back inthe past.





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