The Chinese Negotiation Mark Lam Chairman & CEO Live365, Inc. January 17, 2006 Santa Clara University Mark Lam Chairman & CEO Live365, Inc. January 17,

The Chinese NegotiationThe Chinese NegotiationThe Chinese NegotiationThe Chinese Negotiation

Mark LamMark LamChairman & CEOChairman & CEOLive365, Inc.Live365, Inc.

January 17, 2006January 17, 2006Santa Clara UniversitySanta Clara University

Mark LamMark LamChairman & CEOChairman & CEOLive365, Inc.Live365, Inc.

January 17, 2006January 17, 2006Santa Clara UniversitySanta Clara University


“You've heard the tips for negotiating in China: Bow and

scrape. Dress funereally. Bestow expensive gifts. To move

your dealings to the next level, you need to understand the

cultural context of Chinese business style.”

-- The Chinese Negotiation, by John Graham & Mark Lam

(Harvard Business Review, October 2003)


The Roots of Chinese Culture

1. Agrarianism- Chinese are affected by millennia of living close to the soil:

• peasant farming- Chinese sages distinguished between:

• the “root”: agriculture• the “branch”: commerce

- Social and economical policies favored the root and slighted the branch

Cultural characteristics:• Communal (not individualistic) • Loyalty and obedience to family hierarchy

Implications to Chinese negotiation:• People who dealt with the branch, merchants, were looked down upon



2. Morality- Confucianism:

• Prosperous society should be ruled with a benevolent moral code• Five cardinal relationships between: ruler and ruled, husband and

wife, parents and children, older and younger brothers, and friend and friend- Taoism:

• Yin and Yang oppose and complement one another simultaneously as a whole• The key to life was to find the Tao – “the way”

Cultural characteristics:• Rigorous adherence to hierarchical relationships • Holistic thinking• Stress on finding the way than finding the truth

Implications to Chinese negotiation:• Chinese are more concerned with the means than the end• Ritual back-and-forth haggling to settle differences



3. Chinese pictographic language- Chinese children memorize thousands of pictorial characters- Words are pictures rather than sequences of letters

Cultural characteristics:• Chinese thinking tends toward a more holistic processing of information

Implications to Chinese negotiation:• Chinese are better at seeing the big picture• Americans have an easier time focusing on the details

人人口口手手大大日日田田月月

哭哭笑笑



4. Wariness of foreigners- Long and violent history of attacks from all points of compass- Ebb and flows of empires and dynasties

Cultural characteristics:• Cynicism about the rule of law and rules in general

Implications to Chinese negotiation:• Chinese trust their families and close friends, plus bank accounts


The Eight Elements of the Chinese Negotiation Style

1. Personal Connections- Chinese put a premium on individual’s social capital of friends, relatives and associates- Americans place a premium on networking, information and institutions

- Guanxi depends on a strict system of reciprocity: huibao• Not immediate, American-style reciprocity• Long-term reciprocity is a cornerstone of enduring personal relationships• Favors are always remembered and returned• Ignoring reciprocity is immoral and poisons the well for all future business

关系关系 : Guanxi: Guanxi 关系关系 : Guanxi: Guanxi



2. The Intermediary- Trust must be transmitted via guanxi:

• A trusted business associate pass you along to his trusted business associates• Links could be hometown, family, school, previous business ties

- A talented intermediary is indispensable even after the initial introductory meeting • Intermediary, not the negotiator, brings up the business issue• Intermediary settles differences

- To foreigners, intermediary is an interpreter not so much of words as of culture• Only native Chinese could read and explain the moods, facial expressions and body

language Chinese negotiators exhibit during formal negotiations

中间人中间人 : Zhongjian Ren: Zhongjian Ren中间人中间人 : Zhongjian Ren: Zhongjian Ren



3. Social Status- Confucian values of obedience and deference to one’s superiors remains strong- American-style formality of “Just call me Mark” doesn’t play well

- Negotiations may require a meeting of equals to stimulate more cooperation• Top-level Chinese executives are not prepared to bargain or be persuaded• Their role is to evaluate the relationship during a show of sincerity by Westerners• High-level meetings can work wonders in pushing forward negotiations

社会等级社会等级 : Shehui Dengji: Shehui Dengji社会等级社会等级 : Shehui Dengji: Shehui Dengji



4. Interpersonal Harmony - While respect and responsibility are the glue that binds hierarchical relationships, friendships and positive feelings hold relationships of equals together

• Non-task sounding may last hours, days, weeks…• Including home visits, long dinners, invitations to events

- Attempt to do business without having established sufficient renji hexie is rude

- Trust and harmony are more important than any piece of paper

- If the Westerners do their best to maintain renji hexie, the Chinese will consider their counterparts’ interests even if negotiations get rocky

人际和谐人际和谐 : Renji Hexie: Renji Hexie 人际和谐人际和谐 : Renji Hexie: Renji Hexie



5. Holistic Thinking - Be prepared to talk a thousand things simultaneously and in a haphazard order

• Chinese want long descriptions of background and context• Chinese negotiations seemingly never settles anything

- How can one know if negotiations are progressing well?• Higher-level Chinese executives attending the discussions• Questions beginning to focus on specific areas of the deal• Recognizable softening of attitudes and positions on issues• Chinese talking among themselves in Chinese – trying to decide something• Chinese calling for more meetings

整体观念整体观念 : Zhengti Guannian: Zhengti Guannian 整体观念整体观念 : Zhengti Guannian: Zhengti Guannian



6. Thrift - China's long history of political instability has taught its people to save their money - Chinese save nearly four times as much of their household income as Americans do. - They focus on savings results in negotiations in a lot of bargaining over price usually

through haggling

节俭节俭 : Jiejian: Jiejian 节俭节俭 : Jiejian: Jiejian



7. Endurance, Relentlessness or “Eating Bitterness and Enduring Labor” - Chinese diligence primarily reflected in two ways at the negotiation table

• The Chinese will have worked harder in preparing for the negotiations than the Westerners

• They will expect longer bargaining sessions

- Three tactics to demonstrate your own chiku nailao:• Ask Questions• show endurance by going to great lengths to do your research and then educate

your Chinese counterparts• showing patience is a sign of chiku nailao

吃苦耐劳吃苦耐劳 : Chiku Nailao: Chiku Nailao 吃苦耐劳吃苦耐劳 : Chiku Nailao: Chiku Nailao



8. “Face” or Social capital - Mianzi defines a person's place in social network - It is the most important measure of social worth

- In Chinese business culture, a person's reputation and social standing rest on saving face

- Causing the Chinese business partner who brought you to the table to lose mianzi is no mere faux pas; it's a disaster

面子面子 : Mianzi: Mianzi 面子面子 : Mianzi: Mianzi


The View from Both Sides


QuestionsQuestions??QuestionsQuestions??

Documents

The Chinese Negotiation Mark Lam Chairman & CEO Live365, Inc. January 17, 2006 Santa Clara University Mark Lam Chairman & CEO Live365, Inc. January 17,