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CCM
14,4

Negotiating with Chinese: success

of initial meetings is the key
Yunxia Zhu and Bernard McKenna

354

UQ Business School, University of Queensland, Ipswich, Australia, and

Zhu Sun
Genertec Advertising International Co. Ltd, Beijing, Peoples Republic of China
Abstract
Purpose Negotiating with the Chinese is an important topic in international business and crosscultural management since China is playing an increasingly active role in doing business with the
western countries. The purpose of this paper is to study initial meetings with the Chinese during
business negotiation processes. In particular, it seeks to explore the processes of negotiation between
the Chinese, Australian and American cultures.
Design/methodology/approach The discussion is based on authentic cases collected from
meetings which took place in both China and Australia, and the negotiation cases are analysed in the
theoretical framework based on cross-cultural negotiation processes and intercultural dimensions.
Findings The findings indicate that success of initial meetings is an important key to determine
success for business negotiations.
Originality/value The paper is of value through highlighting the fact that initial meetings with
the Chinese can be seen as essential to negotiation since the Chinese tend to develop relationship or
guanxi first before the actual negotiation takes place.
Keywords China, International business, Negotiating, National cultures, Cross-cultural studies
Paper type Case study

Cross Cultural Management: An

International Journal
Vol. 14 No. 4, 2007
pp. 354-364
# Emerald Group Publishing Limited
1352-7606
DOI 10.1108/13527600710830368

Introduction
More and more countries are involved in negotiating with Chinese in international
business since China started its economic opening-up around the 1980s. So negotiating
with Chinese is also becoming increasingly important for international business
successes in particular, since after China joined WTO in December 2001. It is
anticipated that more frequent negotiations with Chinese will take place as China is
going through free trade negotiations with a number of western countries. However,
negotiating with Chinese can be very challenging and Chinese have been sometimes
recognized as some of the toughest negotiators in the world (e.g. Young, 1994). People
from other cultural backgrounds, especially those from the west[1], often find the
behaviour of Chinese negotiators to be difficult and unintelligible. This is the reason
why much attention has been given to studying Chinese negotiation styles. To our
knowledge, the research on this topic has mainly focused on all the negotiation styles
and very little has been done to examine the importance of initial meetings in business
negotiations. The initial meetings with Chinese can be seen as essential to negotiation
since Chinese tend to develop relationship or guanxi (Fang, 1999) first before the actual
negotiation takes place. Based on the authors consultancy experience, initial meetings
are of great importance to subsequent processes of negotiation. This paper will take
this initiative of investigating into the importance of initial business meetings that may
lead to successful negotiations. In the meantime, it will also look into the factors at the
initial meetings that may interrupt negotiations. The cases analysed in this paper
derived from a series of business meetings that took place in either Australia and China
since from 1999. Business managers views are also incorporated to substantiate our
arguments.

The following research questions are proposed. First, what roles does culture play
in the initial meetings of business negotiations with Chinese? Second, what are the
specific cultural factors that affect the development of business negotiation processes?
To answer these questions, this paper will first develop a theoretical framework
followed by a discussion of the research method. The theoretical framework will focus
on the universal or western cultural dimensions as well as Chinese-specific dimensions.
The discussion will use this theoretical framework to analyse ten negotiation cases
between Chinese and Australians or Americans. From this analysis, recommendations
are made and the significant implications for cross-cultural management are
highlighted.
Theoretical framework
This theoretical framework to analyse negotiation with Chinese defines cross-cultural
negotiation, and discusses negotiation behaviour and intercultural dimensions,
particularly Chinese-specific dimensions of face and guanxi.
Cross-cultural negotiation
Chaney and Martin (2004, p. 196) define cross-cultural negotiation as discussions of
common and conflicting interests between persons of different cultural backgrounds
who work to reach an agreement of mutual benefit. Cross-cultural negotiation is more
difficult 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 the
final outcome of a business deal: indeed Adair and Brett (2005) speak of a normative
negotation model, that is, choreographed around the stages of relational positioning,
identifying the problem, generating solutions and reaching agreement. There are
numerous other theorizations about stages. For example, McCall and Warrington
(1984) use a three-stage model which involves pre-negotiation, face-to-face interaction
and 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-task
sounding (negotiating parties get to know each other); task-related exchange of
information (parties subjective needs and preferences open to discussion); persuasion
(parties attempt to influence the other sides needs and preferences by using various
persuasive tactics) and concessions and agreement (parties accomplish an agreement
which often is the summation of a series of concessions).
These stages will be used to analyse the negotiation cases in this study for two
reasons. First, they incorporate relevant aspects to study the complicating effects of
differing cultural behaviours. For example, cultures may resort to different ways of
getting to know each other. Second, they represent a synthesised model
comprehensively embracing both tangible actions of transactions and also the nontangible processes of non-task warming up of interpersonal relations.
Negotiation behaviour
According to Ren et al. (2002), there are three approaches for the study of behaviour
theory. The psychological approach focuses on analysing negotiators personalities,
perceptions, expectations and their persuasive techniques. The learning approach
views 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 dual
responsiveness model shows that a negotiators response is a function of their own
previous pattern of making concessions as well as the opponents concession rate. The
psychological approach is relevant to our analysis since we focus on examining
behaviours of people from different cultures.
China appears to be one of the most challenging countries in which to conduct
negotiations, according to Buttery and Leung (1998). Woo (1999, p. 116) finds that
western business people entering a negotiation in China are often confronted with
fierce adversarial bargaining that appears to lack politeness and consideration and find
that the Chinese negotiators are tough, shrewd and tenacious. With the aim of finding
reasons why negotiating with Chinese carries difficulties among western business
people, these authors emphasise the great influence of Chinese culture on negotiation
style, although Ma (2006) questions whether this is so. For example, they have
investigated aspects such as Confucianism, Taoism, collectivism, face, patience, guanxi
and social status. Among these aspects, Confucianism, face and guanxi are studied
most frequently and are believed to be the key factors governing the behaviour of
Chinese negotiators. They are also used in this paper to indicate a Chinese perspective
since we are dealing with negotiation across cultures. More importantly this study will
view 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 basic
negotiation skills, it is important to understand the cultural differences, and to modify
the negotiation style accordingly. Therefore, the discussion of intercultural
dimensions is in order.
Intercultural dimensions
Among the various intercultural dimensions, the three seen as relevant to negotiating
with Chinese because of their emphasis on communication styles are Halls high- and
low-context cultures and Hofstedes power distance and individualism and collectivism
since China started its economic opening-up in 1978 (Hall, 1976; Hofstede, 1991). In
addition, Confucianism is also discussed for obvious reasons of dealing with the
Chinese culture. These cultural dimensions are seen as relevant to the negotiation
processes. For example, if a culture has different expectations about the negotiation
processes, members of this culture may have a clash as to where the first process ends
and where the second process starts.
According to Hall (1976, p. 79), a high-context message emphasises the physical
context or internalized in the person rather than the coded, explicit, transmitted part
of the message. A low-context communication, on the contrary, stresses the
importance of information vested in the explicit code (Hall, 1976, p. 70). Gudykunst and
Kim (1997, p. 68) echo Halls view and further confirm the above issues of high- and
low-context cultures (see also Kim et al., 1998). Referring to the difference between
Chinese and American cultures, Lin and Miller (2003, p. 288) state, members of highcontext cultures (e.g. Chinese) are not likely to express their opinion openly and
explicitly, whereas members of low-context cultures (e.g. American) appreciate
openness and directness with little attention to hidden contexts. This kind of
differences in communication style can be a barrier to cross-cultural negotiations since
these cultures may not share same expectations about the behaviour involved in each
of the negotiation processes. Hofstedes power distance can be another factor affecting
cross-cultural negotiations. Power distance is the extent to which the less powerful

members of institutions and organisations accept that power is distributed unequally

(Hofstede and Bond, 1984, p. 419). Different cultures have different attitudes to
hierarchy and the distribution of power. For example, The Chinese have a strict
hierarchical system and place emphasis on rank (Sabath, 1999, p. 38), whereas
Australians and Americans tend to pay less attention to social ranking.
Hofstede (1991) also divides cultures based on the dimension of individualism and
collectivism. Leung (1987, p. 899) further explicates collectivism as the tendency to be
more concerned about the consequences of ones behaviour for in-group members and
to be more willing to sacrifice personal interests for the attainment of collective
interests, whereas individualism refers to the tendency to be more concerned about
the consequences of ones behaviour for ones own needs, interests and goals.
According to Hsu (1985), as members of collective culture, Chinese people emphasise
group goals and needs, and strive to maintain relational harmony. A meta-analysis by
Sama and Papamarcos (2000) also supports the claim that collectivisitic cultures make
decisions differently particularly considering such issues as group harmony and in/
out-group allegiances. In contrast, members of individualistic culture such as
Australians, value individual autonomy and interests, and encourage competition
(Hofstede, 1991).
Confucianism emphasises the responsibilities of individuals toward one another on
five important human relationships those between ruler and subject, husband and
wife, father and son, brother and brother and friend and friend. Confucianism also
advocates a social order that values duty, loyalty, honour, filial piety, respect for age and
seniority and sincerity (Seligman, 1999). As Woo points out (1999, p. 117), Confucianism
concerns obedience to, and respect for, superiors and parent, duty to the family, loyalty
to friends and the hierarchy at work. Consequently, effect of the Confucian li principle
on negotiation is a tendency to favour organisational hierarchy and centralized decision
making (Hong and Engestrom, 2004, p. 554). Confucianism has implications for
negotiating with Chinese. According to Fang (1999), Confucianism is more concerned
with righteousness and human-heartedness than profit. This explains why Chinese
negotiators do not rush into formal contract discussions, but take considerable time to
build up trust with their negotiation partners. Second, because Confucianism considers
that business is governed more by moralistic notion of sincerity and trust than by the
legalistic 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 trust
between the parties, and to western business people a verbal agreement with Chinese is
as effective as a written contract (Roehrig, 1994). Third, Confucianism advocates the
relative 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 and
personalities of their negotiation partners and defensive about freely disseminating
information about themselves (Buttery and Leung, 1998).
The role of Confucianism, however, must also incorporate the related aspects of face
and guanxi. Face involves projection and reflection of self-image because it is a
claimed sense of favourable social self-worth that a person wants others to have of her
or him (Ting-Toomey and Kurogi, 1998, p. 187). Face is described as a projected social
image 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 Chinese
society. The significant role of face in Chinese society could be seen through Woo and
Prudhommes (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 and
business life. According to Zhu and Ulijn (2005), Chinese-specific dimensions
including face can be an important reason for cross-cultural management and
negotiations. Here two Chinese face-related terms can be crucial for understanding
Chinese negotiation: giving face and losing face. Giving face during the negotiation can
be understood as giving ones respect to negotiators on the other side of the table and
recognizing the status and moral reputation of the negotiators in society. It is important
for western business people to protect their Chinese counterparts face but it is perhaps
even more important to give face to them (Buttery and Leung, 1998). Losing face can
occur from a positive or negative perspective. Positive face refers to the desire for
acceptance and approval from others. This involves showing approval of their
personality, attributes, accomplishments, appearance . . . as well as to show that they
are 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 is
limited (Trees and Manusov, 1998). Treating Chinese negotiators as junior in rank
when their official status in an organization is higher can cause them to lose face (Woo
and Prudhomme, 1999). Therefore Brahm (2003, p. 18) believes that it is important to
to give your Chinese counterpart face at the negotiation table without losing it
yourself. Oetzel and Ting-Toomey (2003) point out that face negotiation theory
provides an organising and explanatory framework for conflict behaviours in
negotiation and, in particular, they point out that cultural backgrounds directly affect
negotiators attitude toward face.
Guanxi, the Chinese term for relationship, is one of the most important Chinese
cultural traits. Its meaning has altered over time from the five Confucian role
relationships in interpersonal relationships to the mutual exchange of favours in
diverse social networks (Hong and Engestrom, 2004, p. 554; see also Luo, 1997). It is
also translated as personal contacts or personal connections. Chinese give
considerable effort to developing guanxi, which is usually established among people
who share a commonality of certain identities for example, schoolmates, fellow
villagers and old friends (Fang, 1999). The importance of developing guanxi with
Chinese for foreign business people has been emphasised by many researchers from
different 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. To
achieve success, western business people must rely on good personal relationships.
Woo and Prudhomme (1999) state that in business negotiations the side that can
assemble more guanxi network will be more formidable. Schnepp et al. (1990) hold that
a fine guanxi with high-level officials in Chinese bureaucracy can smooth negotiation
and generate good business. However, guanxi is not about immediately returning one
favour with another. It may involve the constant giving without obtaining a favour in
return 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 and
will 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 of
cross-cultural negotiation from both the western and eastern perspectives.
Research method and data
The research method is based on a case study of ten negotiations over the period
between 1999 and 2002 between Chinese and American/Australian business

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

Negotiating with
Chinese

The negotiation cases

From 1999 to 2002, one of the authors worked in an investment promotion service
centre in Beijing, China, a not-for-profit organisation directly affiliated to and totally
funded by a district government. Because the mission of the centre is to act as a liaison
bridge for investors in Beijing, it attracted a lot foreign attention. In her three years
experience working in this centre, she participated in ten initial face-to-face meetings
between Chinese and western business people, mainly from Australia and America. To
enhance cooperation between the two parties, the meetings were in different forms
including seminars, negotiations, forums, and informal discussions. Despite this, the
results of all these meetings were the same in that no business cooperation between
both parties occurred. One specific case has been chosen for discussion to more closely
consider the different stages of negotiation.

359

Analysing the cases

General findings from the data are discussed first. The apparent common business
objective of the negotiating parties is to achieve a business deal. There are four
findings. First, the Chinese delegations showed a concern to establish further trust or
relationship before any business deal can be signed. Second, only up to three
negotiation processes including non-task sounding, exchange of information and
persuasion were completed in the ten cases. This was mostly because the final process
of completing the deal did not occur. Third, communication barriers were apparent and
appear in all three processes. Finally, conflicts occurred, which involved all the cultural
dimensions. In particular, Confucian cultural traits were a major cultural factor
triggering barriers to the ChineseAmerican/Australian business negotiations. While
causation cannot be established between these traits and negotiation failure, this
suggests 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 often
occurred here in deciding on the finishing point for this process. As shown in the case
in the Appendix, both parties seem to have started well using appropriate terms to
greet each other. However, the rest of the process experiences difficulties as to when to
end the non-task sounding process. The cultural dimensions discussed earlier can help
explain specifically what the barriers are and the Chinese negotiators as part of the
collectivistic group seem to need more time for this process. The conflict in this process
is invisible. The Australian group may have thought that they had finished the first
process of knowing each other. However, the Chinese actually seemed to need more
information about their Australian counterpart after the greetings in order to establish
personal rapport consistent with guanxi. What the Chinese expected in this process
was not the Australians current business, but some more personal information, such
as the past work experience of the Australians and where they originally came from.
Such information would have helped the Chinese group establish guanxi with their
counterparts. Furthermore, Confucianism advocates that knowing others is more
important than being known.

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The uneasiness caused by this conflict in the first process often carries over into the
ensuing stages to such an extent that the negotiation process seems doomed. In fact,
what sometimes follows was predominantly communication within the Chinese group
as they usually tried to determine what their communication strategies should be after
the first process had failed. As illustrated in the Appendix, the conflict between the two
groups becomes even more evident in this process. Since the Chinese thought they had
not established the mutual trust and guanxi with the Australians, they were reluctant
to speak much in front of strangers.
The second process of information exchanging was often uneasy with further
mismatches in satisfying each others information needs. Sometimes communication
styles can even have an impact on the authenticity of information. As shown in the
Appendix, the Australians, after extensively introducing their products and services,
must find it difficult to follow the Chinese speeches, which include considerable
acknowledgement to C District Council, but very little information about the Chinese
businesses. This kind of acknowledgement reflects the collectivistic nature of
the Chinese culture: that is, to Chinese people, any success is the result of group
endeavour. Individuals are not expected to display their own achievements in public;
instead they should emphasise the help and support that they have obtained from
others. So acknowledgement is an indispensable part of Chinese speeches. That is why
both of the two Chinese businessmen expressed their appreciation to the C District
Council, which Mr Wang, head of the delegation represents. The high-power
distance also applies to this process. Mr Lin and Mr Ma followed Mr Wangs order by
speaking up at the meeting immediately even though they showed clear signs of
unwillingness.
By the third stage, the accumulated uncertainty and dysfunctionality almost
completely undermine the process of persuading each other. It was often impossible
for the Americans/Australians to carry on with their pre-arranged persuasion
strategies since the Chinese party had failed to provide them with the information
essential for negotiation. Consequently, the negotiation meetings often ended
here without any real outcome. As indicated in the Appendix, Tom hints the
beginning 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 the
product which are smart design and good quality. But his invitation for the Chinese
group 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 polite
and giving face to others.
Conclusions and recommendations
This paper explored the processes for negotiating with Chinese. It did this by
examining the specific negotiation processes. It then analysed initial meetings using a
theoretical framework based on cross-cultural negotiation and intercultural
dimensions. 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 the
processes of negotiation. It has been found that the first process of non-task sounding
process 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

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, in
a cross-cultural context, negotiation becomes much more complex and difficult. The
difficulty involves dealing with different sets of values, attitudes, behaviours and
communication 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 to
each of the negotiation processes accordingly.
Finally, since it is a mutual responsibility for both negotiation parties to understand
the cultural realities of their negotiation partners, it is worthwhile for western business
people 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-cultural
negotiations involving a dual cultural perspective. In particular, more attention should
be placed on further exploring initial meetings of negotiation. The following
recommendations are relevant for both further research and for conducting successful
business negotiations across cultures:
(1) Develop an understanding of process-oriented dimension in particular for
non-task process for understanding Chinese cultural dimension, which would
help explain the Chinese negotiation behaviour. This point also leads to the
next one.
(2) Be patient in non-task sounding process. Chinese usually need time to build
trust and create guanxi with their counterparts in this process before moving
ahead with the next processes of negotiation.
(3) It is important to make sure that trust has been successfully built in the taskrelated exchange of information process, because Chinese tend to provide
adequate and useful information for the people they can trust. This will
eventually make the persuasion process easier.
In sum, keeping good guanxi with Chinese negotiators and spending sufficient time to
develop understanding in the non-task sounding process is the basis for achieving
successes in business negotiations with Chinese. Further research, however, needs to
be done to look at successful negotiation cases to see if initial meetings also play an
important 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 analysis
of our data.
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Appendix
Negotiation case
At the end of 1999, C, District Council of Beijing, sent a delegation to visit their sister town T City
in Australia where C and T had already established a sound relationship. The delegation, headed
by the deputy governor, included eight people with four government officials and three
businessmen.
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 the
Chinese 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 Chinese
in detail. For example, Tom, a double-rider bicycle producer brought a sample to the seminar and
explained 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-rider
bicycle, because it looks smart and is of very high quality. If you introduce it to the Chinese
market, it must be very popular.
There was a clear pause after Toms presentation. Tom seemed to be waiting for responses
and questions from the Chinese, the Chinese group, however, only responded by nodding and
smiling.
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.

Negotiating with
Chinese

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Process 4. Since the three did not reach an agreement, Mr Wang, head of the delegation
ordered Xiao Lin and Xiao Ma to make a speech immediately. Obeying this order, Mr Lin and
Mr Ma respectively expressed their gratitude to the C District Council for the councils long-term
support, and they further commented that they would not succeed in their business without this
support. In concern to their own business, they only provided the audience with only a brief
introduction.
The seminar then ended abruptly without any agreements or even cooperative initiative
mentioned. Worse, there were no further contacts between the Beijing District and T City groups
after the Chinese delegation returned to China.
Corresponding author
Yunxia Zhu can be contacted at: yzhu@business.uq.edu.au

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