Negotiating with the Chinese: a Socio-Cultural Analysis

Negotiating with the Chinese: A Socio-Cultural Analysis
Pervez Ghauri Tony Fang
China has been one of the most favorite markets for Western firms for the last decade. However, doing business with China is considered difficult, mainly because negotiating with Chinese counterparts is quite complex. This paper analyses the negotiation process with China from a socio-cultural perspective. A Swedish multinational, Ericsson, is followed for several years and its negotiation process for different Chinese projects in the telecommunication industry is studied in depth. Based on these cases and literature a model is developed and some conclusions are drawn. Finally, managerial implications presented as four Ps: Priority, Patience, Price and People sum up the essence of Chinese business negotiation process.

he People’s Republic of China (PRC) started to open up its economy to the rest of the world in December 1978. Since then, Western business communities have been enthusiastic about China—the world’s largest emerging market with more than one billion consumers. The Western enthusiasm for China decreased somewhat during a period following the Tiananmen Square incident in June 1989. But it rebounded and increased even more vigorously in the 1990s. China’s rank in world trade rose from 32nd in 1978 to
Pervez Ghauri is Professor in International Business, Manchester School of Management, UMIST, P.O. Box 88, Manchester M60 1QD, United Kingdom. Tel: [phone]; Fax: [phone] [e-mail] . Tony Fang, Institute of International Business, Stockholm School of Economics, P. O. Box 6501, SE- 113 83 Stockholm, Sweden. Tel: [phone]; Fax: [phone] [e-mail] .

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9th today. By the end of 1995, China already approved a total of 258,000 foreign-invested enterprises with contractual foreign investment of US$395.7 billion and actual invested capital of US$135.4 billion. By the year 2000, China was recipient of more than 20% of the total FDI in

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