Chinese Negotiations and the Use of "Yes"

I just returned from an AmCham event on cultural and language barriers in sourcing materials from China. As anyone dealing with Chinese will tell you, "yes" doesn't mean yes. Can you deliver this by Tuesday? Yes. Do you agree that your company is properly valued at $100? Yes. Have you negotiated a distribution agreement before and are you familiar with our form? Yes. Are you capable of manufacturing this type of widgit? Yes.

Never, ever, in China will you hear the word "no" except from a government official. Much of the lecture was directed at these types of communication barriers. The lecturer explained that while Americans tend to get right to the point in negotiations and hit the specifics before getting to the general (after all, if you can't agree on the basic specifics, why bother with the general), Chinese start with the general and work their way to specifics.

A typical negotiation for an acquisition might start like this:

Round 1. One hour plus dinner. Discussion focuses on the weather and on cities that the expat, who just spent US$8,000 to fly over business class plus 5 nights at the Ritz, has visited on his prior trips to China.

Round 2 approx. 1.5 months later. 1.5 hours plus lunch and dinner. Discussion focuses on both executives backgrounds, what companies they've worked for in the past, what positions they held there, types of cuisine that are famous in China, whether the expat prefers spicy Chinese or sweet. Another $8,000 trip plus hotel.

Round 3 approx. 3 months later. 1 day plus two lunches and one dinner. Discussion finally moves to plant capacity, general discussion about average annual revenues in which Chinese executive exerts great liberties, role and vision of western company considering the purchase. Cost of flight is reduced by the amount of frequent flyer miles executive is building up, but hotel bill remains the same.

Round 4 approx. 10 days later. 2 days, 2 dinners, two lunches, one karaoke bar. Another ticket and 10 days at the Westin. Discussion begins to get a little more specific and western executive has performed some due diligence. Capacity is discussed in more detail and the broad outlines of the deal are formulated. All parties agree on the outline and western executive has lawyers draft initial memo of understanding.

Round 5 approx. 4 days later. Western executive returns home, reviews draft of memorandum from attorney and forwards to Chinese counterpart for discussion. Two days after emailing document to Chinese counterpart, he learns through his staff that the Chinese executive has rejected all the basic terms he said yes to in the meeting. Phone call ensues and Chinese executive appears to be mollified after western executive concedes major negotiation point.

Round 6 approx. 3 months later. 3 days, 2 dinners, 3 lunches, one karaoke bar. Another ticket, this one full price and 7 days at Westin. Discussion begins to get specific and Chinese party reneges on at least 1/2 the deal points in the memorandum that he had conceded to over the past 3.5 months. Western executive gets a bit testy, concedes several significant points and pushes for greater information sharing between the parties.

It goes on like this for some time. For the Chinese, the negotiations are never over. Even after the documents are signed. They don't consider anything final.

These types of issues were discussed at tonight's event and during questioning, someone asked why the Chinese uniformly lie when they are asked if they can do something and they can't. Well we don't consider that lying. In some cases we are trying to please the boss and we don't want to lose face. In others, we have to say yes or we wouldn't get the deal. Ummm. Yes, I see your point. But why isn't that lying? If I ask you if you can do something by tomorrow and you look at me and say yes you can knowing full well you can't, why isn't that lying. It's just a cultural difference. One I don't like. And it is lying.