Five Ways to Earn Trust of Chinese Partners
Businessmen from all over the world are striving to fill a niche in the enormous Chinese market. But your deals might come to an impasse if you fail to stay up-to-date on the Party's resolutions, delay in responding to an email, or simply wear white to a negotiation.
The most important thing you need to understand when negotiating with the Chinese is that you need them, they do not need you. No matter how unique and profitable your proposal is, you will still have to play by their rules.
Know political context
In China, active Party officials can be found in almost every company, including small and medium businesses, and especially large ones. Furthermore, every company with foreign equity is legally required to have such administrative involvement from officials. All decisions made by Chinese partners have a political basis, and it is better not to try to force them to deviate from the Party line. If you demonstrate an understanding of the political context in China, your partners will treat you like an experienced and trustworthy individual.
There are some main concepts that help with understanding the Chinese political context. First and foremost – the five-year plan, which is widely covered in the media. It is executed, in accordance with the Confucian traditions of vertical management, first at the level of large state companies, who then hire contractors, who, in turn, hire subcontractors, who order services from small and medium businesses.
Second, there are the long-term state-run programmes. For example, the Belt and Road initiative tells us that China prioritizes transportation and logistics projects. There is also a lesser-known internal development programme aimed at expanding domestic demand. It requires the hiring of Chinese companies as the main contractors for any business activities. If you negotiate to use your own foreign contractor, the negotiation is likely to stall and you will waste everyone’s time.
There are an estimated 12,000 new companies forming in China every day, creating a relentlessly competitive environment. As soon as a new business niche appears, dozens of companies rush to fill it, working hard to optimize the process, while improving manufacturing and the product itself. Whoever survives this initial skirmish wins access to the huge Chinese market of 1.5 billion consumers. This is why Chinese companies characteristically gain capital and grow rapidly. Such fierce competition ensures the copying of products, so be ready for your product to inevitably be copied as well. How should you react? Exactly the same way all the other Chinese companies do – enter more than one market. Every large and successful Chinese company runs several unrelated businesses at once. It is not unusual for a Chinese fast-food chain to also have its own consumer goods and clothes manufacturing companies.
The Chinese adapt to changing market conditions very fast and expect their partners to be no less flexible and swift. For a Chinese partner, it is common courtesy to maintain a fast pace in all aspects of the relationship, including the most banal interactions – turning around emails, drafting proposals, accepting offers, or adapting to changing terms of a deal.
Know cultural context
China has always been huge, geographically. To maintain order across this widespread land, common customs and processes governing proper action, including business activities, were introduced thousands of years ago. It is mandatory to observe these rituals, as your Chinese partners will evaluate your awareness of their customs. If you repeatedly demonstrate a lack of understanding of local traditions, you will come to be known as a “laowai” (white monkey) – a Chinese term for an ignorant foreigner who doesn’t know anything about the local way of life. One mistake is likely to be overlooked, but twenty will irreversibly damage your image. A foreign businessperson does not want to be categorized as a “laowai” because he or she will then be treated like a five-year-old child. No one will humiliate you, but no one will take you seriously in negotiations either.
One more cultural complication is the fact that Chinese partners use the first meeting, which generally lasts a long time, only to form an opinion of you. Often official meetings include no business talk at all, you're just being evaluated. If you impress, then business conversation will take place later that night over dinner.
Therefore, it is worth remembering a couple of basic things. When negotiating, address your communication exclusively to the head of the delegation, as the rest are effectively assistants and talking to them directly reduces the head's status in the minds of his or her subordinates. Also, try to avoid conversing with an interpreter.
Give out your business card with two hands. Don't wear white or give any white gifts, as this colour symbolizes death. Do not refuse an invitation to dinner under any circumstances. This is a sign the negotiations are going well. And even if you're not a fan of Chinese cuisine, make sure you eat and drink – wine, for example – everything that's served, otherwise you will insult the partners.
Propose a strategy rather than a specific deal
The Chinese business model always looks long-term as the Chinese are spoiled by the attention of the whole world. Therefore, they will not appreciate you offering only a sale of your product, however attractive and original it may be. In China, they prefer long-term cooperation. There, a reliable partner is one who has developed a strategy to stay in the Chinese market for the long haul. Such partnerships are more comfortable and trustworthy.
An ideal negotiation proposal would sound something like, “This is only the first trial batch of our product, our volume is going to increase, we expect to reach certain sales indicators, we are going to develop, and this is how we see our business in five to 10 years.” Such an approach is greatly appreciated in China.
With a love for strategic business planning, the Chinese expect precise facts and numbers, not vague words. Instead of a blurry project concept, present a straightforward business plan with clear projections and a payback period. Contemporary Chinese businessmen are very financially savvy. Many of them study in business schools.
Remember that an ideal business plan must be in Chinese, and a simple direct translation from English is not good enough. The Chinese are all about visuals. Hieroglyphs are not just symbols that represent sounds, they convey concepts, images and messages. As a result, Chinese presentations are always rich with images and graphics. Moreover, distinct from Europeans, they highly value the deductive method – arriving at concrete particulars from general concepts. This means you have to adapt your approach even at the level of the logic driving your narrative.
Adhering to all the rituals, rules and conventions commonly found in the Chinese business environment is not easy. If successfully done, however, the businessperson will be able to unlock immense and diverse prospects within the world’s second-largest economy.