Global trade often means sourcing from suppliers in China. However, working with suppliers from a different culture can result in miscommunications and frustrations that can lead to reduced profits. This article discusses the important aspects to bear in mind when dealing with Chinese suppliers, and it introduces some essential tactics to employ to increase the likelihood of a beneficial negotiation. And finally, it highlights the key elements of Chinese culture that every international trader should know when working with Chinese suppliers.
Understand your opponent: Chinese negotiating tactics
When going into a negotiation, you have to have done your homework. This means knowing your target price points, minimum order quantities (MOQs), sample and product lead times from the Chinese factories, and packaging and quality requirements. In addition, to get the best deal and a lower price out of your suppliers, you have to be ready to beat them at their own game. Here are four Chinese negotiating tactics you need to be aware of before you start your negotiation.
Using flattery to their advantage
Chinese suppliers will usually open with flattery. This is often used to encourage the other party to reply with a self-deprecating remark (as politeness rules dictate), thereby placing them on the back foot from the outset of the negotiation. To avoid this, open with flattery first or simply accept the remark quickly and politely, and move on.
Focusing on mutual interests
Chinese suppliers prefer to move away from compromise by stressing mutual interests between the two parties. In this way, it can be easier to ask the client to take on a heavy burden (such as covering a cost usually incurred by the supplier) to ensure the deal goes through smoothly and mutual interests are assured. It is essential to not fall into this trap: favors can be done but never lose money in a deal and make sure you get something in return, or you may appear weak.
Never saying “no” outright
Chinese suppliers are notorious for never saying “no,” however, the act of not saying “no” does not mean that they are not refusing. If a Chinese supplier says something might be “possible,” be aware that this can often be an ambiguous “no.”
Stalling for time
Bureaucracy can mean slow-moving negotiations, with new charges to be negotiated for quality checks and paperwork coming up during the supply process. Additionally, Chinese suppliers often have to deal with a longer chain of command than the client, meaning a need to check with superiors before committing to anything. All of this means Chinese suppliers have become very apt at stalling for time, with a seemingly endless tolerance for patience.
However, when the wait is on the other side, Chinese suppliers may become impatient and threaten clients with longer lead times should things on their side not move faster. If stuck in one of these situations, remember that you should not let yourself be blackmailed — it is easier for you to get new suppliers than it is for them to get new clients.
The rule of three: top negotiation rules for Chinese suppliers
Know the importance of pecking order
Hierarchy is very important in Chinese negotiations — so much so that parties will trade business cards upon meeting to ensure everyone knows who they are talking to. When working with Chinese suppliers you may find that you are dealing with someone at the bottom of the chain, which means they will not have access to the people at the top and can not make decisions. To ensure negotiations go quickly and smoothly, make sure you are talking to someone with some power. To do this, have someone with a higher rank in your team too, as this will show mutual respect and ensure you negotiate with someone who can make decisions.
Build a solid relationship before pushing terms
Building trust is key to any business partnership, and this is especially true of working with Chinese suppliers. Building a relationship with your suppliers based on mutual trust will lead to greater transparency, faster lead times, and a higher likelihood that they will help you if needed. Start building this relationship by putting the plan of a long-term, mutually-beneficial partnership on the table, with the understanding that this will be the case so long as everyone acts honorably.
Understand high-context cultures
China is classed as a country with a high-context culture, meaning that a lot of weight is given to subtlety and collective understanding during conversations. This can make negotiations tricky for foreigners who are used to direct communication where what is said is the intended meaning. Chinese suppliers may say one thing while their body language and expression say another. However, this is not considered lying in China as among Chinese people there would be a cultural understanding of the real meaning behind the words. Familiarize yourself with the subtleties of body language to ensure you are on the same footing as your supplier.
How to negotiate with Chinese suppliers: 7 top tips
1. Do your due diligence
Chinese manufacturers value hard work over skill, so it’s important to come prepared in order to gain their respect and the upper hand in the negotiations. Knowing labor costs, what a reasonable price would be for small and large orders, the quality controls for the exporting and importing countries, and other essential information will help secure a good deal. You will also need this information when going through every aspect of the contract, as Chinese suppliers like to be thorough. Finally, the start of the negotiation process is a good moment to mention if you have any contacts as the more connections you have (known as guan xi) the better standing you will possess.
2. A good relationship is vital
Westerners often behave as though a contract is legally binding and solid but for Chinese suppliers contracts are worth nothing if the relationship is not good and there is no strong work partnership in the future. A great way to start on the right foot is to learn some key phrases in Chinese. Showing that you know some of the language will place you in higher esteem and give the impression that you are experienced and not easily manipulated.
3. Be patient
Your first meetings may not be hugely fruitful. In fact, it may just involve going for lunch together. Chinese suppliers like to know who they are working with so remember to use this time to build a relationship and establish your credentials before getting to the negotiation process.
4. Prepare your compromises
To show that you are ready to compromise when asking your Chinese supplier to compromise for you, put forward a list of demands at the beginning that you are willing to drop later on as a show of goodwill.
5. Remember to bargain
Being thrifty is essential when negotiating with powerful Chinese suppliers. Ensure you bargain hard and build in some wiggle room as you may find that the unit price increases later on. Your Chinese supplier will have done the same.
6. Build interpersonal harmony
When dealing with Chinese suppliers it is important to show good faith and altruism, as this will help forge a good relationship and show that you have money and are therefore successful. Do this by hosting dinners and building interpersonal harmony through generosity (do not be cheap as this will be seen as an insult and show that you do not value the partnership).
7. Understand face
Not “losing face” (known as diu lian) is hugely important in China. This means that you should never embarrass your supplier or yourself. To do this, ensure that you keep a cool head and never get emotional during negotiations, always treat your supplier with respect and do not accuse them of anything mischievous, and don’t ever be cheap. Additionally, you will find that your supplier may try to tire you out the night before negotiations by inviting you to a long dinner with lots of alcohol. If you are invited, do not leave too early but do not let yourself get too drunk either (prepare a good excuse before arriving).
Having a solid relationship with your Chinese suppliers is essential to the healthy growth and stability of your business. However, it is important to always remember that they are your business partners first and colleagues or friends after. Never allow your business to lose profits because of bad negotiations or too many favors, always come prepared, and ensure you follow the right steps by building a good negotiating strategy from the outset. While doing this, always remember where you are and be respectful of Chinese culture, ensuring you remember the golden rules of face and contacts. If you follow this guide, you will soon be on your way to building great relationships with your suppliers and executing strong negotiating strategies for maximum profit.