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is a common practice. Pursuant to the → similar to me-effect, German negotiators prefer negotiation partners with similar negotiation behaviour and values.
4.2 How Chinese Negotiate
4.2.1 Preliminary Notes
In the chapter on German negotiators, we stated that it is not possible to distinguish a general type of German negotiator. Likewise, it is also not possible to distinguish a general type of “Chinese negotiator” or “Chinese negotiation style”. In fact, there are huge regional differences within China—far greater than those found in Germany for example. Hence, negotiators from Hong Kong are closer to the western mentality than Chinese negotiators from the mainland, due to Hong Kong’s historical experience with being an English colony and their recurrent special status. Then there are single ethnic minorities, e.g. the Uyghurs, with specific characteristics in their mentality (direct and emotive communication) which can have an effect at negotiation level. Likewise, there are relatively big differences between large, modern cities and more rural provinces. There are also significant differences between state-owned companies and, in particular, internationally operating private companies. The negotiators of the latter companies are regularly fluent in English and usually also have experience with international negotiations. Both are much less common for employees of state-owned enterprises. Moreover, it should be borne in mind that the People’s Republic of China has passed through one of the most outstanding, dynamic change process of the last centuries, even by global standards. From being a self-contained, communistic, economically weak developing country before economic reforms began in 1978, the PRC has developed China at great speed to become the worldwide No. 1 export nation, and even has the prospect of becoming the biggest economy in the world. The PRC is most definitely on the way to dominate strategic future markets both economically and, in parts, technologically. By the same token, the PRC is also developing into a world power politics-wise.
These developments have taken place within the framework of a capitalistic economy in which not only the communist party but also the state have been granted strong influence regarding strategical economic questions—and even more comprehensively regarding political matters. From the Chinese point of view, and in light of its status as a historical, cultural and political superpower, China has currently regained its standing, to which it sees itself entitled. Many negotiators have now gained experience abroad which was not the case until just a few years ago. Although the practice of including government agencies in the negotiation process has decreased significantly in recent years, governmental involvement is still higher, compared to the western negotiation culture. In negotiations with other companies, Western companies can reap benefits from the fact that they have developed good
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relations both with the Chinese authorities and their own Western government. This—seen from a Chinese perspective at least—is beneficial for overcoming bureaucratic obstacles.
These rapid developments inevitably do not apply to all areas and relate more to younger people than to the older generation. Yet despite this, they facilitate a certain heterogeneity. Opposed to this, traditional Confucianism and the communist party’s guidelines as well as the general orientation towards collective wealth ensure a comparably homogenous socialisation.
Following the roots of the long-established principle of Yin-Yang, traditional and communistic guidelines also match dialectically. With regard to contract negotiations, they also promote the pursuit of outer harmony. Moreover, this approach also complies with the ambiguity tolerance. i.e. the positive fundamental philosophy towards ambiguous communication.
4.2.2 Negotiation Training
In the meantime, the leading Chinese universities offer specific courses on contract negotiations. Besides the educational programs that follow the example of US-American courses, there are also offers that are more closely aligned with their own traditions and preferences. There is great demand for these courses. Already by 2008, the Chinese negotiation teacher Liu Birong (author of approx. 25 books on negotiation) boasted of having taught over 10,000 people the secrets of negotiation.4 From a traditional point of view and right up to this day, mastering strategies and tactics is very important. Accordingly, President Xi Jinping’s televised new year’s speech for 2018 showed a wall of books in the background including, for example, the ca. 2500 year old “The Art of War” by Sun Tzu as well as “On War”, written by Carl von Clausewitz in 1832. In Chinese culture, the use of traditional strategies as well as the development of new strategies and tactics would appear to be more highly esteemed than in Western negotiation culture (see examples under tactics).
4.2.3 Mentality
As stated above, not all negotiators are the same. Various factors can influence the individual negotiator’s mentality and, more particularly, their actual behaviour. However, it can generally be stated that Chinese negotiators can be characterised as being collectivist and, with regard to personal contact, more oriented towards tradition. Hence, the actions of Chinese negotiators are on the whole rule-based. This point, alongside the Chinese language as a characterising element, promotes a comparably homogenous mentality amongst negotiators and a fortiori in relation to their
4 Cf. Mehring (2017), p. 39.
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conduct. Thus, the understanding of negotiations as complex strategy games, which can be won not with mere recipes, but with situation-appropriate strategies and tactics, is also relatively widespread.
4.2.4 Orientation Towards Legal Requirements
In the course of negotiations, the level of orientation towards legal requirements still remains limited. Up until a few years ago, the Chinese legal system exhibited substantial defects—even in fields not relating to the interest of the communist party or the state. Substantial law did not comply with the needs of a modern economy; procedural law and enforcement proceedings were hardly effective; judges did not receive comprehensive education. They were both underpaid and vulnerable to corruption. In addition, they perceived themselves to be dependent on local officials.
The People’s Republic of China is, however, putting major effort into reducing the deficits of their legal order. Yet—with the notable exception of the legal regulation of corruption—these developments do not seem to have decisively impacted the negotiator’s attitude towards law. From a Western perspective, there is a peculiar absence of fair procedures regarding legal proceedings with any of the numerous state-controlled or strategically important companies.
Chinese negotiators do not judge Chinese law to be a decisive safeguard against any breach of duties by the opposing party, which would create enough trust to allow them to take economic risks. In this regard, many negotiators lack a positive attitude towards law. This assumption was supported in the course of a study, conducted internationally by the authors and stated that the majority of the surveyed Chinese did not agree that a deliberate deception on the legal situation should be sanctioned legally. Notwithstanding, there is quite a significant tendency for Chinese negotiators to actually use the law for their own benefit. These days, as opposed to the past, negotiations include lawyers more often. What’s more, the increasing importance of the law is reflected, for example, in the contract clauses, in which Chinese companies certainly invest time and specialised manpower during big projects. Further indications of the greater importance being attached to the law are the Agreement on Chinese law, the Agreement on the authoritativeness of the Chinese language version of the contract, and the Agreement on a Chinese arbitration institution (CIETAC) as the responsible authority in case of dispute.
4.2.5 Trust Building and Contract Negotiations
Contractual relationships generally necessitate having trust in the other party. This especially applies to long-term or complex relations (→ permanent business relation) and those requiring a high level of cooperation. Regarding their substantial content and the according enforcement mechanisms, legal orders can be effective,
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inexpensive deterrents to infringers; so much so, in fact, that they significantly support both parties’ trust in the negotiation. In case any legal orders—such as the Chinese—do not provide this trust (at least, not yet), it is essential to build trust through one’s behaviour during the negotiations. Hence, for quite some time now, non-legal trust-building has played a significant role in China.
Guanxi, the relationship between the companies involved and key people within these companies, is built on the basis of trust. Combined with legal measures, this aims at ensuring long-term success. Although the significance of relationships is deeply rooted in the teachings of Confucianism, it also bears relation to modern economic needs. The Confucianist ideal creates ethical bindings between negotiators of equal rank as well as mutual obligations within hierarchical relationships. The main goal is a harmonious togetherness.
Guanxi is facilitated by many people and involved companies who build this network of trust on the groundwork of long-term relationships. Even in countries with efficient legal orders, stable permanent relationships exist without any need of legal involvement. This is due to the parties being hardly ever, or only in extreme cases, willing to risk long-term relationships for solitary points of dispute, irrespective of their magnitude. In addition, normally in a long-term relationship there is also some personal trust between the managers on both sides.
Turning to legal proceedings in case of conflict in permanent relationships is the last resort, even in countries with an efficient legal order. The functioning of these relationships without any legal involvement certainly explains why Chinese companies tend to strive for permanent relationships. If the Chinese negotiation partner only expects a short-term relationship, much lesser investments into the quality of the relationship are made and the offers are usually assessed as less attractive. Ideal Guanxi, comprising several companies and numerous involved people within those companies, would provide a particularly stable basis, since the consequences of serious mistakes could evoke the weakening or even overall loss of this whole relationship network. At the other end of the spectrum, it is possible to observe the overemphasis of Guanxi in China to the point of unfairly giving advantage to companies beyond any economical reasoning and showing a tendency towards nepotism.
Subsequently, a non-Chinese company, desiring to build a business relationship through negotiations, has significantly better chances if it already has a stable permanent relationship with a different Chinese company within the Guanxi of the potentially new Chinese negotiation partner. Employing one of the often- recommended mediators (Zhongjian Ren) can, however, be classified as a borderline case of corruption, particularly where relationships with the government are concerned. Nonetheless, a well-connected mediator does have a large Guanxi as well as appropriate social status.
In this way, using a mediator facilitates the Chinese company’s trust in the Western company. The mediator thus “lends” a part of the general trust in his person. If the aim is a trustful relationship between two people, it is recommendable to build trust with various people on each side.