Doing Business in China: Negotiate the Relationship From the Start

Negotiating in China means talking about the relationship. (Sorry guys.)

Western businesspeople already know that to do business in China you have to have a relationship. This is the whole basis of guanxi and harmony. The problem is the way Americans and Chinese view relationship. To us Westerners, “relationships” are emotional – they are a matter of personal chemistry. We hear the word relationship and we think of family, romance, marriage, and friendship. In China relationships are regarded differently. They are more like a due diligence investigation – and you definitely have to negotiate for access and openness.

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A lot of Americans don’t like talking about the relationship. We feel that it should be an unspoken process – that when we take a step in building an cordial association (visiting their office, drinking a toast, attending a dinner party) then they will automatically reciprocate and move towards greater understanding. This “strong but silent” approach to business ties can cause a whole new set of problems and misunderstandings.

Where is this relationship going?

Westerners have to negotiate their business relationships in China explicitly, but that doesn’t mean that you should haggle with new partners about who pays for drinks or how many times a week you talk on the phone. It does mean is you have to decide in advance what you want from each business relationship, and tie your China business goals to the relationship-building process. If you determine safeguarding quality or your building supply chain or marketing channels is a priority for your business in China, then you shouldn’t just assume that a few boozy nights of KTV team-building are going to make your Chinese counterparts automatically change their standard operating procedures. You have got to make your specific requirements explicit and build them into a relationship.

Start your relationship-building by figuring out what they want from you and how you’re going to deliver. Then talk about how they’re going to deliver what you need. It’s not always a comfortable conversation. The Chinese side may not know what you really want at first, but keep up with it. Don’t settle for vague promises. You may not be negotiating about specific numbers or transactions until much later, but Chinese businessmen are enthusiastic about discussing “general operating principles” – and you should be too. Only here, you are establishing your goals and limits. The problem that a lot of Americans have is that we think that by going through the motions of banquets and nightclub evenings and drinking sessions that we are somehow building a relationship.

You’ve got to pop the SMART question

Successful Western negotiators in China are good at isolating their business goals (from this specific partner) and articulating them clearly. That means figuring out what it is that you want and how you’re going to turn that into a SMART goal. SMART goal is specific, measurable, actionable, realistic, and timely. If you can’t do that, then you are going to have a lot of problems later on. Chinese aren’t clear on your goals, then they going to fill in the gaps on their own – in ways that may not serve your interests.

China Relationship-Building Worksheet:

  1. Do you need them to want you to succeed?  If you need them to sell, market, or control quality then you have to negotiate the relationship. They have to want you to succeed (or at least not actively want you to fail). That means at a minimum, they have to take your calls, respond to your emails or want to engage with you on some meaningful level.
  2. Do you know what a win looks like?  By the time you start negotiating, you should have pretty good idea where you want to end up. If you don’t know what a win looks like, make that what your relationship-building activities are all about. It’s not smart or even reasonable to expect a relative stranger to look after your interests, but it’s ok to make the early part of your guanxi-build to be about establishing common goals and agreeing on external benchmarks.
  3. You want it when?!? Nothing poisons new relationships more than missed deadlines or arbitrary demands. Be clear about your timing and scheduling issues.
  4. Friend of my friend – my new service provider? Some of your new Chinese counter-parties plan on getting paid (directly or indirectly) by their own network. They may see their value to be connecting you with their network. Find out how they are REALLY getting paid, and establish basic limits and guidelines during the relationship-building phase.
  5. Its only gaunxi till you get caught. Don’t allow relationship building to turn into conspiracy to commit fraud or obstruct justice. There is a difference between relationships and corruption, and it is never too early to establish your limits and align with your new counterparty.


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