Doing business in China: it's far from easy

USA Today (Society for the Advancement of Education), Jan, 1996 by S.R. Nair

Evaluating partners

When evaluating a potential partner, you should look not only at the individuals, but also at the organization itself since the people you would be dealing with may be changed in the course of negotiations. Therefore, you should be able to fathom whether the company has a stable organization and management structure. Do they have the required clout with government authorities, banks, and financial institutions to arrange for the necessary approvals without any inordinate delay? Does the project have the support and backing of the banks and authorities? Is there an internal power struggle among the key managers? I can assure you from personal experience, the last thing you want is to get caught in the cross fire of a war between managers.

The Chinese have a built-in suspicion of strangers, so initial rounds of discussions often are in the nature of probes. The Chinese say, "The first time we meet, we are strangers; the next time, we get to know each other a little; and the third time, we become friends. Then, we can talk business." In fact, the Chinese often negotiate to develop a relationship, rather than to tie up loose ends. Many foreigners take this to be a sign of disinterest and drop the project even before it can be considered seriously. The familiarization process can be shortened considerably by using a consultant who has done business in China and is familiar to the Chinese.

It generally is accepted that using a consultant with knowledge and experience in China is more cost-effective than setting up an office there. Selecting the correct consultant is a project by itself and there are pitfalls to be avoided. For instance, choosing a Hong Kong Chinese for a project in northern China may be disastrous since there are social, cultural, and linguistic differences between the Hong Kong Chinese and those in the north. It can be extremely dangerous to rely on an influence peddler, as you could face indifference and even animosity if your contact falls out of favor. There are many large consulting companies that recently have set up shop in China. However, it must be borne in mind that more important than the firm is the person. While the Chinese respect a reputation, a familiar face goes further.

Negotiating in China is like an elaborate ritual or game. Negotiations tend to be longwinded, rather than brief and to the point. More often than not, your counterpart will not let you know his true objectives, so you have to play a guessing game. Your patience is likely to be tested sorely. Even when you have to turn your counterpart down, though, it has to be done with politeness and respect! If, in the course of negotiations, your Chinese counterpart feels that he has lost face - not been accorded proper respect - you can kiss the deal goodbye.

The concept of "face" is extremely important to the Chinese. It is vital that any proposal or request must be declined without being abrasive and in a manner that means your counterpart does not lose face. Often, the Chinese will bring up an issue or proposal "officially" (especially with strangers) only after ensuring that it would not be declined.