China Factory Culture and Negotiations: Good Luck with That

A client sent me an article he had saved since back in 2007 and in his email he remarked how “when it comes to manufacturing in China, the core — dealing with the people — never really changes.” Not sure if nothing really changes, but I am sure that what is described in this article has not really changed.

The article he sent me is called Negotiations, Strategies, and Experiences and it was written by David Dayton, CEO of Silk Road International Consultancy. I bears mentioning that David has been working in and with Asia for 25+ years and he is fluent in Mandarin and has a PhD “with a focus on Chinese Corporate Cultural Anthropology.” So yeah, when it comes to China’s corporate cultures, David is someone who knows whereof he speaks. On top of this, he has a ton of experience working with China factories

Dayton’s post starts out with him relaying that day’s complaint by a Chinese factory owner about Dayton’s being “too strict” on quality control and how Dayton’s actions were costing the Chinese factory more than it originally budgeted for. The rest of the post consists of Dayton listing out the cultural gems he was able to take away from this experience.

I am running it here after all these many years for one simple reason: It makes for a terrific primer on how to handle China manufacturing or even how to do business in China.

My favorites along with my own comments in italics are as follows:

  • Your negotiations, factory visits and dinners are all scripted. “Roles are defined, what can and can’t be offered is clear before negotiations start and who you will meet and what you will see is typically controlled to a large degree (as it is in the US and anywhere else).” You must learn to play the game and play your role in “the CHINESE script whether you speak Chinese or know their culture or not” and even though the “Western and Chinese scripts are radically different.” So true.
  • Talk with the people with authority to do something about the problem. True everywhere in the world but Chinese companies regularly employ this negotiation tactic. I cannot tell you how many times one of our clients will tell us that they had worked out a deal with their Chinese counter-party only for someone else from the Chinese company to step in and start trying to renegotiate by claiming that the person who reached the deal did not have authority to do so. 
  • There is often both a cover story and the real story and “the only way to get to the real story is to ask a ton of questions and take copious notes.” Westerners often fall short by taking too many things at face value.
  • Do not push so hard on the inconsistencies that someone loses face. Your real goal “ought to be getting production done on spec and as close to on-time as possible” and pushing too hard can work against this goal. This is my favorite and we often tell our clients that if they are going to push, to blame it on the lawyers so as to increase the odds of preserving the relationship. 
  • Good cop bad cop lives in China (like everywhere else). In China, the boss is usually the good cop, with the manager being the bad cop. This exists everywhere in the world and that’s because it can be incredibly effective. 
  • China loves the sacrificial lamb. When there is a problem, it is a common strategy in China to fire someone (or at least say that you have) even though that will do nothing to prevent future problems. So true. I would swear that at least 90 percent of the time in China when something goes wrong the blame is put on someone else. There is almost no such thing as “the buck stops here” there. 
  • Be prepared for the last second closing offer. Once everyone is friends again and all the issues are worked out there will invariably be a last issue that’s just thrown in at the very end. Often literally on the way out the door. ”Oh, by the way, this material is going to cost more on the next order. We’ll eat it this time, but the price is now this much more.” My theory is that this happens because meetings between Chinese usually end with dinner or Karaoke so there is still time to work out issues. But foreigners usually have work meetings during the day and then go home. Whatever the reason, it’s almost comical to me. it’s something they have to bring up, but don’t want to so they wait until there is no possible way to procrastinate it any longer and then, just off the cuff, throw it out.
  • Time is on their side.  They know Westerners want instant gratification, so you must “learn to wait.”  See Negotiating with Chinese Companies: Patience Required. Or as one of our China lawyers loves to say, “if your CEO wants to go to China to finalize a deal, throw away the keys to his or her car.”

The above advice applies to virtually all Chinese business situations and so if you are doing business in China or doing business with China, I urge you to go to the post for additional items on the list and to gain the full flavor of those I have cited. I also suggest you read Negotiating with Chinese Companies: The Long Version.

What would you add to the above?