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Cross Cultural Management: AnInternational JournalVol. 14 No. 4, 2007pp. 354-364# Emerald Group Publishing Limited1352-7606DOI 10.1108/13527600710830368

Negotiating with Chinese: successof initial meetings is the key

Yunxia Zhu and Bernard McKennaUQ Business School, University of Queensland, Ipswich, Australia, and

Zhu SunGenertec Advertising International Co. Ltd, Beijing, Peoples Republic of China

Abstract

Purpose Negotiating with the Chinese is an important topic in international business and cross-cultural management since China is playing an increasingly active role in doing business with thewestern countries. The purpose of this paper is to study initial meetings with the Chinese duringbusiness negotiation processes. In particular, it seeks to explore the processes of negotiation betweenthe Chinese, Australian and American cultures.Design/methodology/approach The discussion is based on authentic cases collected frommeetings which took place in both China and Australia, and the negotiation cases are analysed in thetheoretical framework based on cross-cultural negotiation processes and intercultural dimensions.Findings The findings indicate that success of initial meetings is an important key to determinesuccess for business negotiations.Originality/value The paper is of value through highlighting the fact that initial meetings withthe Chinese can be seen as essential to negotiation since the Chinese tend to develop relationship orguanxi first before the actual negotiation takes place.

Keywords China, International business, Negotiating, National cultures, Cross-cultural studies

Paper type Case study

IntroductionMore and more countries are involved in negotiating with Chinese in internationalbusiness since China started its economic opening-up around the 1980s. So negotiatingwith Chinese is also becoming increasingly important for international businesssuccesses in particular, since after China joined WTO in December 2001. It isanticipated that more frequent negotiations with Chinese will take place as China isgoing through free trade negotiations with a number of western countries. However,negotiating with Chinese can be very challenging and Chinese have been sometimesrecognized as some of the toughest negotiators in the world (e.g. Young, 1994). Peoplefrom other cultural backgrounds, especially those from the west[1], often find thebehaviour of Chinese negotiators to be difficult and unintelligible. This is the reasonwhy much attention has been given to studying Chinese negotiation styles. To ourknowledge, the research on this topic has mainly focused on all the negotiation stylesand very little has been done to examine the importance of initial meetings in businessnegotiations. The initial meetings with Chinese can be seen as essential to negotiationsince Chinese tend to develop relationship or guanxi (Fang, 1999) first before the actualnegotiation takes place. Based on the authors consultancy experience, initial meetingsare of great importance to subsequent processes of negotiation. This paper will takethis initiative of investigating into the importance of initial business meetings that maylead to successful negotiations. In the meantime, it will also look into the factors at theinitial meetings that may interrupt negotiations. The cases analysed in this paperderived from a series of business meetings that took place in either Australia and Chinasince from 1999. Business managers views are also incorporated to substantiate ourarguments.

The current issue and full text archive of this journal is available atwww.emeraldinsight.com/1352-7606.htm

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The following research questions are proposed. First, what roles does culture playin the initial meetings of business negotiations with Chinese? Second, what are thespecific cultural factors that affect the development of business negotiation processes?To answer these questions, this paper will first develop a theoretical frameworkfollowed by a discussion of the research method. The theoretical framework will focuson the universal or western cultural dimensions as well as Chinese-specific dimensions.The discussion will use this theoretical framework to analyse ten negotiation casesbetween Chinese and Australians or Americans. From this analysis, recommendationsare made and the significant implications for cross-cultural management arehighlighted.

Theoretical frameworkThis theoretical framework to analyse negotiation with Chinese defines cross-culturalnegotiation, and discusses negotiation behaviour and intercultural dimensions,particularly Chinese-specific dimensions of face and guanxi.

Cross-cultural negotiationChaney and Martin (2004, p. 196) define cross-cultural negotiation as discussions ofcommon and conflicting interests between persons of different cultural backgroundswho work to reach an agreement of mutual benefit. Cross-cultural negotiation is moredifficult than mono-cultural negotiation because of differences of language and culture(Woo, 1999). Because negotiations are often seen as composed of number stages,researchers pay particular attention to the development of stages that may lead to thefinal outcome of a business deal: indeed Adair and Brett (2005) speak of a normativenegotation model, that is, choreographed around the stages of relational positioning,identifying the problem, generating solutions and reaching agreement. There arenumerous other theorizations about stages. For example, McCall and Warrington(1984) use a three-stage model which involves pre-negotiation, face-to-face interactionand post-negotiation. Graham and Sano (1989) develop a four-step negotiation process,which is not dissimilar to the later Adair and Brett model. These steps are non-tasksounding (negotiating parties get to know each other); task-related exchange ofinformation (parties subjective needs and preferences open to discussion); persuasion(parties attempt to influence the other sides needs and preferences by using variouspersuasive tactics) and concessions and agreement (parties accomplish an agreementwhich often is the summation of a series of concessions).

These stages will be used to analyse the negotiation cases in this study for tworeasons. First, they incorporate relevant aspects to study the complicating effects ofdiffering cultural behaviours. For example, cultures may resort to different ways ofgetting to know each other. Second, they represent a synthesised modelcomprehensively embracing both tangible actions of transactions and also the non-tangible processes of non-task warming up of interpersonal relations.

Negotiation behaviourAccording to Ren et al. (2002), there are three approaches for the study of behaviourtheory. The psychological approach focuses on analysing negotiators personalities,perceptions, expectations and their persuasive techniques. The learning approachviews negotiation as a learning process in which each party is largely dependent on its

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experience of the results of past actions by the two parties. Lastly, the dualresponsiveness model shows that a negotiators response is a function of their ownprevious pattern of making concessions as well as the opponents concession rate. Thepsychological approach is relevant to our analysis since we focus on examiningbehaviours of people from different cultures.

China appears to be one of the most challenging countries in which to conductnegotiations, according to Buttery and Leung (1998). Woo (1999, p. 116) finds thatwestern business people entering a negotiation in China are often confronted withfierce adversarial bargaining that appears to lack politeness and consideration and findthat the Chinese negotiators are tough, shrewd and tenacious. With the aim of findingreasons why negotiating with Chinese carries difficulties among western businesspeople, these authors emphasise the great influence of Chinese culture on negotiationstyle, although Ma (2006) questions whether this is so. For example, they haveinvestigated aspects such as Confucianism, Taoism, collectivism, face, patience, guanxiand social status. Among these aspects, Confucianism, face and guanxi are studiedmost frequently and are believed to be the key factors governing the behaviour ofChinese negotiators. They are also used in this paper to indicate a Chinese perspectivesince we are dealing with negotiation across cultures. More importantly this study willview them in relation to the processes as negotiations. As Woo and Prudhomme (1999,p. 315) appropriately point out, in a cross-cultural negotiation, in addition to the basicnegotiation skills, it is important to understand the cultural differences, and to modifythe negotiation style accordingly. Therefore, the discussion of interculturaldimensions is in order.

Intercultural dimensionsAmong the various intercultural dimensions, the three seen as relevant to negotiatingwith Chinese because of their emphasis on communication styles are Halls high- andlow-context cultures and Hofstedes power distance and individualism and collectivismsince China started its economic opening-up in 1978 (Hall, 1976; Hofstede, 1991). Inaddition, Confucianism is also discussed for obvious reasons of dealing with theChinese culture. These cultural dimensions are seen as relevant to the negotiationprocesses. For example, if a culture has different expectations about the negotiationprocesses, members of this culture may have a clash as to where the first process endsand where the second process starts.

According to Hall (1976, p. 79), a high-context message emphasises the physicalcontext or internalized in the person rather than the coded, explicit, transmitted partof the message. A low-context communication, on the contrary, stresses theimportance of information vested in the explicit code (Hall, 1976, p. 70). Gudykunst andKim (1997, p. 68) echo Halls view and further confirm the above issues of high- andlow-context cultures (see also Kim et al., 1998). Referring to the difference betweenChinese and American cultures, Lin and Miller (2003, p. 288) state, members of high-context cultures (e.g. Chinese) are not likely to express their opinion openly andexplicitly, whereas members of low-context cultures (e.g. American) appreciateopenness and directness with little attention to hidden contexts. This kind ofdifferences in communication style can be a barrier to cross-cultural negotiations sincethese cultures may not share same expectations about the behaviour involved in eachof the negotiation processes. Hofstedes power distance can be another factor affectingcross-cultural negotiations. Power distance is the extent to which the less powerful

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members of institutions and organisations accept that power is distributed unequally(Hofstede and Bond, 1984, p. 419). Different cultures have different attitudes tohierarchy and the distribution of power. For example, The Chinese have a stricthierarchical system and place emphasis on rank (Sabath, 1999, p. 38), whereasAustralians and Americans tend to pay less attention to social ranking.

Hofstede (1991) also divides cultures based on the dimension of individualism andcollectivism. Leung (1987, p. 899) further explicates collectivism as the tendency to bemore concerned about the consequences of ones behaviour for in-group members andto be more willing to sacrifice personal interests for the attainment of collectiveinterests, whereas individualism refers to the tendency to be more concerned aboutthe consequences of ones behaviour for ones own needs, interests and goals.According to Hsu (1985), as members of collective culture, Chinese people emphasisegroup goals and needs, and strive to maintain relational harmony. A meta-analysis bySama and Papamarcos (2000) also supports the claim that collectivisitic cultures makedecisions differently particularly considering such issues as group harmony and in/out-group allegiances. In contrast, members of individualistic culture such asAustralians, value individual autonomy and interests, and encourage competition(Hofstede, 1991).

Confucianism emphasises the responsibilities of individuals toward one another onfive important human relationships those between ruler and subject, husband andwife, father and son, brother and brother and friend and friend. Confucianism alsoadvocates a social order that values duty, loyalty, honour, filial piety, respect for age andseniority and sincerity (Seligman, 1999). AsWoo points out (1999, p. 117), Confucianismconcerns obedience to, and respect for, superiors and parent, duty to the family, loyaltyto friends and the hierarchy at work. Consequently, effect of the Confucian li principleon negotiation is a tendency to favour organisational hierarchy and centralized decisionmaking (Hong and Engestrom, 2004, p. 554). Confucianism has implications fornegotiating with Chinese. According to Fang (1999), Confucianism is more concernedwith righteousness and human-heartedness than profit. This explains why Chinesenegotiators do not rush into formal contract discussions, but take considerable time tobuild up trust with their negotiation partners. Second, because Confucianism considersthat business is governed more by moralistic notion of sincerity and trust than by thelegalistic concept of contract, Chinese business is mostly built on trust instead of law.Chinese negotiate a deal with their partners most effectively when there is enough trustbetween the parties, and to western business people a verbal agreement with Chinese isas effective as a written contract (Roehrig, 1994). Third, Confucianism advocates therelative importance of knowing others and the relative unimportance of being known.This is the reason why Chinese negotiators are so attentive to discern the interests andpersonalities of their negotiation partners and defensive about freely disseminatinginformation about themselves (Buttery and Leung, 1998).

The role of Confucianism, however, must also incorporate the related aspects of faceand guanxi. Face involves projection and reflection of self-image because it is aclaimed sense of favourable social self-worth that a person wants others to have of heror him (Ting-Toomey and Kurogi, 1998, p. 187). Face is described as a projected socialimage in a diverse range of communicative situations (Wright and Orbe, 2003, p. 2).More specifically, face implies status and prestige and is a mark of personal dignity(Woo, 1999, p. 117). This is linked to Confucianism and power dimension in the Chinesesociety. The significant role of face in Chinese society could be seen through Woo andPrudhommes (1999, p. 316) words: The Chinese are preoccupied with the concept of

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face and are very sensitive to having and maintaining face in all aspects of social andbusiness life. According to Zhu and Ulijn (2005), Chinese-specific dimensionsincluding face can be an important reason for cross-cultural management andnegotiations. Here two Chinese face-related terms can be crucial for understandingChinese negotiation: giving face and losing face. Giving face during the negotiation canbe understood as giving ones respect to negotiators on the other side of the table andrecognizing the status and moral reputation of the negotiators in society. It is importantfor western business people to protect their Chinese counterparts face but it is perhapseven more important to give face to them (Buttery and Leung, 1998). Losing face canoccur from a positive or negative perspective. Positive face refers to the desire foracceptance and approval from others. This involves showing approval of theirpersonality, attributes, accomplishments, appearance . . . as well as to show that theyare considered likeable and worthy to be a friend and companion (Metts, 2000, p. 84).Negative face, on the other hand, can be lost when a persons autonomy and freedom islimited (Trees and Manusov, 1998). Treating Chinese negotiators as junior in rankwhen their official status in an organization is higher can cause them to lose face (Wooand Prudhomme, 1999). Therefore Brahm (2003, p. 18) believes that it is important toto give your Chinese counterpart face at the negotiation table without losing ityourself. Oetzel and Ting-Toomey (2003) point out that face negotiation theoryprovides an organising and explanatory framework for conflict behaviours innegotiation and, in particular, they point out that cultural backgrounds directly affectnegotiators attitude toward face.

Guanxi, the Chinese term for relationship, is one of the most important Chinesecultural traits. Its meaning has altered over time from the five Confucian rolerelationships in interpersonal relationships to the mutual exchange of favours indiverse social networks (Hong and Engestrom, 2004, p. 554; see also Luo, 1997). It isalso translated as personal contacts or personal connections. Chinese giveconsiderable effort to developing guanxi, which is usually established among peoplewho share a commonality of certain identities for example, schoolmates, fellowvillagers and old friends (Fang, 1999). The importance of developing guanxi withChinese for foreign business people has been emphasised by many researchers fromdifferent respects, such as relationship marketing (Arias, 1998). For example, Fang(1999) believes that doing business in China is not just a matter of price and product. Toachieve success, western business people must rely on good personal relationships.Woo and Prudhomme (1999) state that in business negotiations the side that canassemble more guanxi network will be more formidable. Schnepp et al. (1990) hold thata fine guanxi with high-level officials in Chinese bureaucracy can smooth negotiationand generate good business. However, guanxi is not about immediately returning onefavour with another. It may involve the constant giving without obtaining a favour inreturn or vice versa for an extended period of time (Buttery and Leung, 1998;Zhu, 2004).

The above intercultural dimensions can be used to interpret cultural differences andwill be used as part of the theoretical framework to analyse cross-cultural negotiations.Our contribution lies in the fact that they will be studied in the light of processes ofcross-cultural negotiation from both the western and eastern perspectives.

Research method and dataThe research method is based on a case study of ten negotiations over the periodbetween 1999 and 2002 between Chinese and American/Australian business

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organisations. They took place either in China or in Australia and they were recordedand written by one of the authors. None of the negotiations took place in theresearchers organisations. The cases were analysed to determine the types ofprocesses that were implemented using the theoretical principles outlined above. Onecase is provided in the Appendix as a representative illustration of the data.

The negotiation casesFrom 1999 to 2002, one of the authors worked in an investment promotion servicecentre in Beijing, China, a not-for-profit organisation directly affiliated to and totallyfunded by a district government. Because the mission of the centre is to act as a liaisonbridge for investors in Beijing, it attracted a lot foreign attention. In her three yearsexperience working in this centre, she participated in ten initial face-to-face meetingsbetween Chinese and western business people, mainly from Australia and America. Toenhance cooperation between the two parties, the meetings were in different formsincluding seminars, negotiations, forums, and informal discussions. Despite this, theresults of all these meetings were the same in that no business cooperation betweenboth parties occurred. One specific case has been chosen for discussion to more closelyconsider the different stages of negotiation.

Analysing the casesGeneral findings from the data are discussed first. The apparent common businessobjective of the negotiating parties is to achieve a business deal. There are fourfindings. First, the Chinese delegations showed a concern to establish further trust orrelationship before any business deal can be signed. Second, only up to threenegotiation processes including non-task sounding, exchange of information andpersuasion were completed in the ten cases. This was mostly because the final processof completing the deal did not occur. Third, communication barriers were apparent andappear in all three processes. Finally, conflicts occurred, which involved all the culturaldimensions. In particular, Confucian cultural traits were a major cultural factortriggering barriers to the ChineseAmerican/Australian business negotiations. Whilecausation cannot be established between these traits and negotiation failure, thissuggests strongly the importance of initial business meetings.

A closer look at the first non-task sounding process provides some useful insights.Normally both parties began by introducing each other. However, confusion oftenoccurred here in deciding on the finishing point for this process. As shown in the casein the Appendix, both parties seem to have started well using appropriate terms togreet each other. However, the rest of the process experiences difficulties as to when toend the non-task sounding process. The cultural dimensions discussed earlier can helpexplain specifically what the barriers are and the Chinese negotiators as part of thecollectivistic group seem to need more time for this process. The conflict in this processis invisible. The Australian group may have thought that they had finished the firstprocess of knowing each other. However, the Chinese actually seemed to need moreinformation about their Australian counterpart after the greetings in order to establishpersonal rapport consistent with guanxi. What the Chinese expected in this processwas not the Australians current business, but some more personal information, suchas the past work experience of the Australians and where they originally came from.Such information would have helped the Chinese group establish guanxi with theircounterparts. Furthermore, Confucianism advocates that knowing others is moreimportant than being known.

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The uneasiness caused by this conflict in the first process often carries over into theensuing stages to such an extent that the negotiation process seems doomed. In fact,what sometimes follows was predominantly communication within the Chinese groupas they usually tried to determine what their communication strategies should be afterthe first process had failed. As illustrated in the Appendix, the conflict between the twogroups becomes even more evident in this process. Since the Chinese thought they hadnot established the mutual trust and guanxi with the Australians, they were reluctantto speak much in front of strangers.

The second process of information exchanging was often uneasy with furthermismatches in satisfying each others information needs. Sometimes communicationstyles can even have an impact on the authenticity of information. As shown in theAppendix, the Australians, after extensively introducing their products and services,must find it difficult to follow the Chinese speeches, which include considerableacknowledgement to C District Council, but very little information about the Chinesebusinesses. This kind of acknowledgement reflects the collectivistic nature ofthe Chinese culture: that is, to Chinese people, any success is the result of groupendeavour. Individuals are not expected to display their own achievements in public;instead they should emphasise the help and support that they have obtained fromothers. So acknowledgement is an indispensable part of Chinese speeches. That is whyboth of the two Chinese businessmen expressed their appreciation to the C DistrictCouncil, which Mr Wang, head of the delegation represents. The high-powerdistance also applies to this process. Mr Lin and Mr Ma followed Mr Wangs order byspeaking up at the meeting immediately even though they showed clear signs ofunwillingness.

By the third stage, the accumulated uncertainty and dysfunctionality almostcompletely undermine the process of persuading each other. It was often impossiblefor the Americans/Australians to carry on with their pre-arranged persuasionstrategies since the Chinese party had failed to provide them with the informationessential for negotiation. Consequently, the negotiation meetings often endedhere without any real outcome. As indicated in the Appendix, Tom hints thebeginning of the third process by highlighting the importance of bicycles for China,and he also tries to persuade the Chinese group with two attractive factors of theproduct which are smart design and good quality. But his invitation for the Chinesegroup to speak fails to solicit any effective response from the Chinese delegates.Instead, they nod and smile, which can be simply a non-verbal symbol of being politeand giving face to others.

Conclusions and recommendationsThis paper explored the processes for negotiating with Chinese. It did this byexamining the specific negotiation processes. It then analysed initial meetings using atheoretical framework based on cross-cultural negotiation and interculturaldimensions. The four factors are highlow context culture; power-distance;individualism and collectivism and Confucianism incorporating face and guanxi.Specific factors relating to different cultural values were identified in each of theprocesses of negotiation. It has been found that the first process of non-task soundingprocess is essential for success in business negotiations with Chinese.

In general, this framework is useful for understanding Chinese negotiation styles.Consequently, these findings offer relevant implications for negotiation in general. For

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example, as the purpose of any negotiation is to reach a mutually beneficial agreement,being able to conduct successful initial meetings can be a big challenge. In particular, ina cross-cultural context, negotiation becomes much more complex and difficult. Thedifficulty involves dealing with different sets of values, attitudes, behaviours andcommunication styles of the other party. As one way of dealing with these challenges,it is essential to apply both intercultural dimensions and culture-specific dimensions toeach of the negotiation processes accordingly.

Finally, since it is a mutual responsibility for both negotiation parties to understandthe cultural realities of their negotiation partners, it is worthwhile for western businesspeople to disseminate their cultural values to their Chinese counterparts as well.Intercultural competency is, after all, a two-way learning and communication process.Further research is needed to further explore ways of communicating in cross-culturalnegotiations involving a dual cultural perspective. In particular, more attention shouldbe placed on further exploring initial meetings of negotiation. The followingrecommendations are relevant for both further research and for conducting successfulbusiness negotiations across cultures:

(1) Develop an understanding of process-oriented dimension in particular fornon-task process for understanding Chinese cultural dimension, which wouldhelp explain the Chinese negotiation behaviour. This point also leads to thenext one.

(2) Be patient in non-task sounding process. Chinese usually need time to buildtrust and create guanxi with their counterparts in this process before movingahead with the next processes of negotiation.

(3) It is important to make sure that trust has been successfully built in the task-related exchange of information process, because Chinese tend to provideadequate and useful information for the people they can trust. This willeventually make the persuasion process easier.

In sum, keeping good guanxi with Chinese negotiators and spending sufficient time todevelop understanding in the non-task sounding process is the basis for achievingsuccesses in business negotiations with Chinese. Further research, however, needs tobe done to look at successful negotiation cases to see if initial meetings also play animportant role for these successes.

Note

1. By west we refer to specific countries with a Eurocentric leaning such as the USA,Australia and New Zealand. These countries are relevant to our discussion and analysisof our data.

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AppendixNegotiation caseAt the end of 1999, C, District Council of Beijing, sent a delegation to visit their sister town T Cityin Australia where C and T had already established a sound relationship. The delegation, headedby the deputy governor, included eight people with four government officials and threebusinessmen.Process 1. When the Chinese delegation arrived at the seminar, there were more than 15 T City

business people waiting for them. John, head of the T delegation, and Mr Wang, head of theChinese delegation greeted each other:Process 2. Business meeting soon started after they greeted each other. At the meeting, five

Australians from different business areas introduced their products and services to the Chinesein detail. For example, Tom, a double-rider bicycle producer brought a sample to the seminar andexplained the functions of his product in detail for the Chinese delegation.Process 3. Tom said to the Chinese delegation: I know China has long been called the bicycle

kingdom, so I am sure most Chinese people especially young people will like this double-riderbicycle, because it looks smart and is of very high quality. If you introduce it to the Chinesemarket, it must be very popular.

There was a clear pause after Toms presentation. Tom seemed to be waiting for responsesand questions from the Chinese, the Chinese group, however, only responded by nodding andsmiling.Interlude. Now it was the turn of the Chinese delegation. There was some inner group

conversation among the three Chinese businessmen as to who should speak for the group.Clearly, they felt pressed for a speech and did not seem to be ready for it.

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Process 4. Since the three did not reach an agreement, Mr Wang, head of the delegationordered Xiao Lin and Xiao Ma to make a speech immediately. Obeying this order, Mr Lin andMr Ma respectively expressed their gratitude to the C District Council for the councils long-termsupport, and they further commented that they would not succeed in their business without thissupport. In concern to their own business, they only provided the audience with only a briefintroduction.

The seminar then ended abruptly without any agreements or even cooperative initiativementioned. Worse, there were no further contacts between the Beijing District and T City groupsafter the Chinese delegation returned to China.

Corresponding authorYunxia Zhu can be contacted at: yzhu@business.uq.edu.au

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