The road less traveled effective sino-western contractual negotiation (revised)

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The Road Less Traveled. Effective Sino-Western Contractual Negotiation: A Cross- Disciplinary Analysis

Transcript of The road less traveled effective sino-western contractual negotiation (revised)

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The Road Less Traveled.

Effective Sino-Western Contractual Negotiation: A Cross-

Disciplinary Analysis

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This paper was originally a thesis written for a Master of Laws at the

University of Sydney, Australia. After being offered the opportunity to turn

the thesis into a Phd, the author instead incorporated and expanded the

insights to unify systems of human potential from around the world and

define a new way to realize our potential as individuals, relationships,

families, companies, and members of the human community. This unified

system is called metacentering. Because the author has a deep connection

with India, the system was launched there to media acclaim in 2004. We

are currently preparing for global release in January 2011 together with

pioneering technology to help you live more harmoniously within yourself

and within the world. You can find out more at freedomsway.net

Prior to the new world order that arrived with September 11 – cross-

cultural understanding was advisable for effective business dealings in the

international arena. It was also advisable for humanity but we rejected that

need. The need was almost articulated as prophecy in 1968 by mythologist

Joseph Campbell:

“The difficulties posed are great. Chiefly they derive from the fact that the

values of both of the opposed hemispheres, the individual and the social,

are …mutually repellant. That is to say, the partisans of each banner view the values of the other side merely as negative to their own and

therefore, in every attempt either to attack or to achieve concord,

succeed only in dealing with their own negative projections, giving battle to their own shadows on the walls of their own closed minds – which

presents a fine circus of clowns for the laughter of the gods, but for

mankind with, increasing danger, a turba philosophorum that is being reflected not in a sealed retort but in the carnage of exploded cities.” 1

Developing an aptitude for cross-cultural understanding could determine

our very survival.

This paper will not just give you insight into the way people from other

cultures see the world – it will also show you how your own culture has

shaped your perception and it will show you ways to engage others with

superb and profound result.

1 Campbell J, Creative Mythology, First printed 1968,1991 (reprint edition), Arkana, pp314-315.

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“It is not easy for westerners to realize that the ideas recently developed in the west of the individual, his[/her] selfhood, his[/her]

rights, and his [/her] freedom, have no meaning whatsoever in the

Orient … They are in fact repugnant to the ideals, the aims and orders of life, of most of the peoples of this earth.”2

“Human beings are drawn close to one another by their common

nature, but habits and customs keep them apart.”3

2 Campbell J, Myths to Live By, 1993, (reprint edition) Arkana, p61. 3 Confucius

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The Road Less Traveled: Effective Sino-Western Contractual Negotiation.

Table of Contents

Focus ...................................................................................................... 2

1. Introduction ........................................................................................ 3

1.1 The background ................................................................................ 4

1.2 The underlying thesis ........................................................................ 7

2. The Negotiation Process Per Se ........................................................... 7

2.1 The importance of perception and culture to the structure of negotiation .. 9

3. Chinese Perception and Comprehension ............................................ 12

3.1 The Role of Cultural analysis in Sino-Western negotiation ..................... 14

4. Cultural Perception ........................................................................... 18

4.1Formal, informal and technical patterns of awareness. .......................... 18

4.2 Time ............................................................................................. 21

4.3 The relevance of perceptual differences t o negotiation ........................ 23

5. Individualism and Collectivism .......................................................... 24

6. Sino-Western Communication ........................................................... 27

6.1 High-context and low-context communication ..................................... 29

7. The place of law and the basis of contractual obligation ................... 31

7.1 The Structure ................................................................................. 32

7.2 Relationship-The basis of contractual rights ........................................ 35

7.3 Contemporary contract dynamic ....................................................... 38

7.4 The future role of traditional attitudes towards Sino - Western contracts 42

8. Conclusion ......................................................................................... 44

Bibliography .......................................................................................... 48

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Focus

"The historical development of insulated disciplines housed in

segregated departments has produced a legitimating ideology that in

effect suppresses critical thought.”3

As a result, it has also stultified the evolution of multifaceted

disciplines, such as the science of bi-cultural negotiation. Similarly, it

has blinded the insulated discipline of Law and, especially, the study of

its role in other cultures. This ignorance cannot continue. It is the

product of an attitude which is antiquated and obsolete. As the global

village shrinks, and consequently, crossing cultural boundaries

becomes a habitual affair, we will have to wake up.

The People's Republic of China (hereinafter referred to as "China") is

centrally relevant to this perspective for two reasons. First, since the adoption of it's "open door" and socialist market policies, its relevance

to international political and commercial affairs has had an almost exponential growth rate.4 Secondly, and more specifically, the orientation of Chinese law, culture and psychology is, in effect, polar

to the West. Therefore, the Western lawyer/negotiator has before him

or her a vitally important challenge for which he or she is unlikely to be prepared.

3Giroux H, Shumway D, Smith P & Sosnoski J, The Need for Cultural Studies: Resisting

Intellectuals and Oppositional Public Spheres, (internet)

http:eng.hss.cmu.edu/theory/need.html. 4In six years, from 1991 to 1996, foreign direct investment in the PRC has grown from

4.4 billion to 42 billion dollars (US), (World Bank: World Investment Report, 1996, at

56) making China the second most popular country for direct foreign investment in the

world.

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1. Introduction

The Chinese5 approach to contractual negotiation and the West's inability to

understand and work with it, has proven to be a significant stumbling block.

As one leading commentator states, cultural differences is "[u]nquestionably

the largest and possibly the most intractable category of problems in Sino-

[Western] business negotiations." 6 Ignorance of the cultural implications to

the Sino-Western negotiation process can be fatal. 7 As has been said of the

Japanese-Western experience

An attorney's failure to appreciate or become familiar with the

importance of the cultural influences ... often reveals itself at a critical

stage of the transaction, and the results can be disastrous. 8

Whilst, China is modernising rapidly, as is its previously anorexic commercial

legal structure,9 and a sense of predictability and reliability has slowly begun

to permeate the legal political

5In referring to the Chinese approach I do not intend to expound a stereotype but,

"to recognise that people do their business, act out their roles, take up their

attitudes in concrete, though complex, contexts that shape them and are not only

shaped by them." - Tay AE-S & Leung CSC, The Relation Between Culture, Commerce

and Ethics, in Tay AE-S & Leung CSC (eds), Greater China: Law, Society and Trade,

1997, LBC, p4. 6Pye L, Chinese Negotiating Style: Commercial Approaches and Cultural Principles,

Quorum, 1992, p23. 7Cf East Asia Analytical Unit - Department of Foreign Affairs and Trade, China

Embraces the Market, 1997, p188.

8Walters RE "Now that 1 Ate the Sushi, Do We Have a Deal" - The Lawyer as Negotiator

in Japanese - US Business Transactions, (1991) 12 North Western Journal of

International Law and Business 335 at 335. 9 E.g. Company Law of the PRC, adopted 1993; Economic Contract Law of the PRC,

amended 1993; Foreign Trade Law of the PRC, adopted 1994; The Law of the PRC on

Foreign Equity Joint Ventures (1979), the clauses of which were vague and general

(characteristic of Chinese drafting), and hence very unpredictable, was revised, and

adopted on April 4 1990; Law of the PRC on Chinese-Foreign Co-operative Joint

ventures, adopted and promulgated in 1988 - The implementing Regulations were not

approved and promulgated until 1995; Rules for the Implementation of the Law of

the PRC on Foreign Capital Enterprises approved and promulgated in 1990; Income

Tax Law of the PRC Concerning Foreign Investment Enterprises and Foreign

Enterprises approved and promulgated 1991; Provisional Regulations of the PRC

Concerning Value-Added Tax, adopted and promulgated in 1993; Provisional

Regulations of the PRC Concerning Business Tax, adopted and promulgated in 1993.

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climate, this cultural obstacle remains.10 Resources are being used

ineffectively, avoidable disputes are occurring at both the pre and post

contractual stage, and most importantly a substantial amount of capital is

being used inefficiently and the capacity to make more is being inhibited.

Moreover, the situation could intensify, for as Rubin and Sander observe, in

the wake of global inter-dependence, "the transactions are increasingly

complex and multicultured. Hence attempts to resolve disagreements through

negotiation increasingly require sensitivity to the possible contributing role of

cultural differences." 12

For these reasons, this paper will define these cultural implications, and

demonstrate how they impact on the Sino-Western negotiation dynamic. In

addition, it will refer to the inextricable connection between law and the

cultural system within which it operates, which on any substantive level is

ignored by most commentators.

1.1 The background

At the outset, it is helpful to be acquainted with the basic psychological

themes underlying these cultural implications, which Bond states "can be

used to make sense of a variety observations about Chinese behaviour."12

They are, inter alia:

[1]. Laws negotiated by men [/women] are rigid, artificial, and

insensitive to the changing circumstances of life. The judgement of

wise and compassionate men [/women] is a better way to regulate personal, political and social relationships.

10For example as Scogin states: "The continuing effect of traditional values and

assumptions on current practices is apparent to those engaged in the process of

negotiating and effectuating contracts in China today." Scogin Jr HT, Between Heaven

and Man: Contract and the State in Han Dynasty China, (1990) 63 Southern California Law

Review, 1326 at 1327. 11

Rubin JZ & Sander EX Culture, Negotiation and the Eye of the Beholder, (July 1991)

Negotiation Journal 249 at 249. 12Bond MH, Beyond the Chinese Face - Insights from Psychology, 1991, Oxford

University Press, p118.

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[2]. Man [/woman] exists in and through relationships with others. The

goal of socialization is to train children for lifelong interdependence

with others by developing skills and values which promote harmony.

The family is a fundamental cradle of sure support across time and

requires especial commitment from its members.13

In this behavioural vein, there are two universally recognised cultural

variants in Sino-Western negotiation, central to this study. The first, is the

Chinese distaste for legal considerations, and their preference for moralist

and ethical principles.14 This is prevalent in,

the relationship between the parties as a source of obligation, the point

in the contracting process at which agreements become binding, the

personalised nature of negotiations, the insistence on flexibility in

responding to changed circumstances, and the effort of dispute

resolution a t facilitating compromise and maintaining relationships. 15

The second, is the protagonist role played by politics, economics and social

relations in the Chinese negotiation process, which the West, by comparison,

ignores.

As argued below, whilst a balance, which allows for commercial predictability,

needs to be struck between the culturally bi-polar attitudes towards law, it is

the West which needs to alter its approach to the latter. This is demanded by

a legal, commercial, all-pervasive political16 and social climate different to its

own.

13Bond MH, Beyond the Chinese Face - Insights from Psychology, 1991, Oxford

University Press, p118. 14For example, as one respected observer of Chinese commercial practices states:

"The Chinese are not used to and do not like to sign long complicated contracts that

attempt to tie absolutely everything down. They will frequently refuse even to read a

lengthy contract, insisting that it be simplified and shortened." And in addition: "To

the Chinese, a contract is a commercial agreement, not a legal document, and

should not be the last word on anything. You might say that they sign contracts only

as formal confirmation that they intend to do business with you, not how they are

going to conduct the business." - De Mente Boye, Chinese Etiquette and Ethics in

Business, 1993, NTC, 121. 15

Scogin Jr HT, Between Heaven and Man: Contract and the State in Han

Dynasty China, (1990) 63 Southern California Law Review, 1326 at 1327. 16Pye L, Chinese Negotiating Style: Commercial Approaches and Cultural

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In addition, the need for effective negotiation is further compounded by two extra

factors. First, whilst the legislative structure has improved, and there has been an

attempt to install adequate enforcement mechanisms,17 the commercial legal structure

is not "well understood, respected [or] integrated", and in practice "getting legal

redress for failure to comply with a contract is just about impossible."18 Secondly, in a

"world dominated by social relationships",19 where the style of negotiation is relational

rather than transactional,20 litigation is a commercially inadequate remedy."

Principles, Quorum, 1992, p23. As Blackman states Chinese officials tend "to use rulings and

approvals to induce foreigners to accept certain views and to sign agreements, and then change

them if they "no longer suit the interests of the ruling or approving authority or the Chinese

Partner." Blackman C, Negotiating China: Case Studies and Strategies, 1997, Allen and Unwin,

p40 referring to a complaint made, by a business consultant and former ambassador to China, to

Chinese officials attending the 1986 Australia-China Senior Executive Forum. 17

Due to the political and economic vulnerability of the local courts to the local authorities and

interested parties, the Supreme People's Court requires the next-highest-level court to review

any proposal to deny enforcement by a local court. - Notice of the Supreme People's Court

Concerning the Handling by the People's Courts of Issues Relating to Foreign Related and Foreign

Arbitral Matters, August 28 1995. 18

Blackman C, Negotiating China: Case Studies and Strategies, 1997, Allen and Unwin, p4. A

former President of the Supreme People's Court described the failure to enforce court decisions

as "the most outstanding problem in the administration of justice in the economic sphere." -

Zheng Tianxiang, Zuigao Renmin Fayuan Gongzuo Baogao [Supreme People's Court Work

Report], 1988 NPCSC Gazette No 4, at 29. Complaints about problems in enforcing judgments

are a regular feature of the annual Supreme People's Court work reports. See also for example a

report by the Australian Department of Foreign Affairs which says that "numerous studies

highlight the difficulties of enforcing contracts in China." East Asia Analytical Unit - Department

of Foreign Affairs and Trade, China Embraces the Market, 1997, p204 referring to the Economist

Intelligence Unit, 1996a, Investing, Licensing and Trading: China, Hong Kong. For a more

detailed analysis see Clarke DC, Dispute Resolution in China, (1991) 5 Journal of Chinese Law

245 at 263 - 268. 19

Smith C, People and Places in the Land of One Billion, Westview Press, 1991, p41. 20

Goh Bee Chen, Negotiating with the Chinese, 1996, Dartmouth Publishing Company, p3. 21

For example, due to its commitment to succeed in the Chinese market IBM "has had to bend its imperial rules...On a number of occasions, its Chinese customers have signed contracts only to come back after the merchandise has already been shipped, say they don't have the money to pay for the order, and ask that part of the shipment be given to them free, or that the price be reduced down to the amount of money they have - a common ploy. Rather than lose the business, IBM has both given additional discounts and withdrawn some of the less vital items from such orders." - De Mente Boye, Chinese Etiquette and Ethics in Business, 1993, NTC, 110.

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1.2 The underlying thesis

Whilst there has been a significant amount of consideration on the

content of the Chinese culture and its relevance to Sino-Western negotiation,

little attention has been paid to its framework. It is through this framework,

however, that we can expound certain psychological and strategic processes,

such as perception, comprehension and communication, critical to

understanding the Sino-Western dynamic.

Thus, this paper will attempt to articulate the bi-cultural dynamic, including the

precipitate place of law and relationship, in Sino-Western negotiation by

reference to this cultural keystone. In doing so, it will also demonstrate how the

Western negotiator may redefine his or her awareness in responding adequately

to the cultural schism. It will also be tentatively suggested that certain Chinese

commercial strategies, such as the notion of market flexibility, should be

embraced by the West and incorporated into Sino-Western contractual planning.

2. The Negotiation Process Per Se

Most lawyers are unaware of the structural dynamics involved in the negotiation

process.22 Whilst it could be said that lawyers can and do manage to negotiate

in mono-cultural situations, largely unaware of the forces at play and minusthe

skills that would be useful in midwifing the process, this grace does not apply to

the bi-cultural arena. Awareness of the extra variables is vital.

This problem is made acute in that the Chinese are collectivistic and high

context communicators, contrasted with Westerners who are individualistic and

low context communicators. In addition, Westerners predominantly tend to have

what Hall23 has called

22For example see Fisher R, What About Negotiation as a Specialty, (Sept 1983) 69

American Bar Association Journal 1221 -1224. 23

Hall Edward T, The Silent Language, Doubleday, 1959, p95-96.

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Informal awareness whereas the Chinese predominantly have formal

awareness. These concepts will be examined later.

Clearly, there is a considerably higher probability for a serious breakdown in

communication or misunderstanding between Chinese and Western parties.24

However, despite these two major differences, and, inter alia, differences in

values and rules, the structure of the negotiation processes of the two cultures

are "essentially similar".25 As demonstrated in the diagram below, "there are

common patterns and regularities of interaction between the parties in

negotiation irrespective of the particular context or the issues in the

dispute.”26 This is of some benefit, as it means that whilst the negotiation

style may change the inherent developmental stages to which both parties are

accustomed remains. There are several benefits to this, and also advantages in

being aware of them, as

they tell negotiators what to expect at each stage, give them guidance in

planning their own strategy and a basis for interpreting the strategies of

their opponents, facilitates coordination of the negotiation process with

the litigation process, and prevent the embarrassment and harmful

effects of mistakes in timing. 27

Furthermore, it assists in giving the two parties some unconscious sense of

commonality. However, largely, the relevant similarities stop here.

24As Pye observes: "When the cultural gap between parties is too great, the "logic" of

tacit negotiations cannot prevail. Whereas the differences between ... [Westerners]

and Chinese may not always seem so great, in many situations the gap is enough to

cause misunderstandings. "- Pye L, Chinese Negotiating Style: Commercial Approaches

and Cultural Principles, Quorum, 1992, p93. 25

Gulliver P. H., Disputes and Negotiations, Academic Press, 1979, pxv. 26

Gulliver P. H., Disputes and Negotiations, Academic Press, 1979, p64-5. 27

Williams GR, Negotiation as a Healing Process, [1996] No 1 Journal of Dispute

Resolution 1 at 34.

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2.1 The importance of perception and culture to the structure of

negotiation

Many of us either take for granted, or are unaware of what cultural and

psychological mechanisms are brought into play during the negotiation

process.28 However, it is vital to acknowledge the main mediums of the

negotiation process per se, if we are to correctly place the Sino-Western

considerations in their deserved critical context. Gulliver states,

[t]hese matters include the interests, goals, expectations, strategies,

and psychological concomitants (attitudes, perceptions, emotional

dispositions, etc.) of both parties; the ambient reality of the situations

and changes in it that indicate the result of non-agreement; an

appreciation of the costs of the possible outcomes to each party; the

limits of the effective range of consideration for the issues between

them; whether and where respective expectations overlap; relevant and

potentially useful norms and rules and overarching principles; areas of

relative strength, weakness, and tenacity; the nature and strength of

outside interests and influences; and much more depending on the

particular parties, their inter-connections, and the issues in dispute. 29

(my italics)

For this study, the psychological concomitants, that Gulliver refers to is the

most crucial aspect of the negotiation process. This is because it is the

psychological concomitants that regulate our perception and comprehension of

reality and consequently, as shown in the diagram30 below, determine the

success or failure the negotiation.

Serious bi-cultural analysis requires examination of the framework of the

participating cultures, and not just their

28As Professor Roger Fisher, one of the world's leading authorities on negotiation,

states, "[m]any people consider negotiating like putting on their clothes: no need for

theory, just do it. But in negotiation, theory does help." - What About Negotiation as

a Specialty, (Sept 1983) American Bar Association Journal, vol 69, 1221 at 1222. 29Gulliver P. H., Disputes and Negotiations, Academic Press, 1979, p70 30Gulliver P. H., Disputes and Negotiations, Academic Press, 1979, p84.

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content.31 For culture "is not just thoughts, it is a way of thinking," 32 and

reveals "the collective programming of the mind "33. As Hall states,

people from different cultures not only speak different languages but,

what is possibly more important, inhabit different sensory worlds.

Selective screening of sensory data admits some things while filtering

out others, so that experience as it is perceived through one set of

culturally patterned sensory screens is quite different from experience

perceived through another.34 (My italics).

In the same vein, culture provides the individual

with his [or her] theory of what his [or her] fellows know, believe, and

mean, his [or her] theory of the code being followed, the game being

played, in the society into which he [or she] was born.35

In other words depending on the set of concomitants belonging to A and to

B, A could see a particular set of circumstances critically differently from B.

Furthermore, depending on the same set of concomitants, the response

provided by A could also be critically different from B. This point is

accentuated in the Sino-Western situation. This is because our respective

culture is a system of knowledge which shapes and constrains the way our

brain acquires, organizes, and processes information and creates our

“internal modes of reality.” 36

31Thus throughout this study, the content of the culture, such as findings from

Sino-Western case studies, wil l by referred to in demonstrating the effect of the

framework and how it functions in commercial reality. 32Keightley DN, Late Shang Divination: The Magico-Religious Legacy, in

Explorations in Early Chinese Cosmology, Rosemont Jr H (ed), 1984, Scholars

Press, p11. 33Hofstede G, Culture's Consequences: International Differences in Work -

related Values, 1980 , Sage. 34Hall ET, The Hidden Dimension, 1966, Doubleday, 2. 35Keesing R, Theories of Culture, (1974) 3 Annual Review of Anthropology 73-97

at 89. 36Keesing, R, Theories of Culture, (1974) 3 Annual Review of Anthropology 73-97

at 89.

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The cyclical mode) of negotiation: P, Party; O, Opponent.

Culturally specific differences in China and the West, such as the

individualist/collectivist and high context/low context communication split,

are derivatives of our cultural systems. They lead to substantially different

parameters of decision making.37

Furthermore, the bi-cultural situation in itself accentuates the cultural

tendencies of the individual, for when same culture people are in a group,

such as a negotiation team, the group tendencies. the cultural tendencies will

tend to dominate.38 In expounding this response, Roosens observes that

one’s culture is

Particularly attractive when one is continually confronted by others who

live differently... If I see and experience myself as a member of an ethnic category or group, and others – fellow members and outsiders -

recognize me as such, "ways of being” become possible for me that set

me apart from the outsiders.

37Pye L, Chinese Negotiating Style: Commercial Approaches and Cultural

Principles, Quorum, 1992, p93. 38Keesing, R, Theories of Culture, (1974) 3 Annual Review of Anthropology 73 at 89.

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These ways of being contribute to the content of my-self perceptions.

In this sense I become my ethnic allegiance; I experience any attack

on the symbols, emblems, or values (cultural elements) that def ine my

ethnicity as an attack on myself.39

Such a response fuels our ethnocentrism - "where we interpret and evaluate

other's behavior using our own standards ... caus[ing] us to evaluate

different patterns of behavior negatively, rather than try to understand

them."40 As explained below, this fact is compounded with the Chinese due to

their collectivistic orientation.

Thus, the need to consider the Chinese system of perception and the way it is

expressed in Sino-Western negotiation becomes immediate.

3. Chinese Perception and Comprehension

The perception of the Chinese,41 their sense of reality and their perceived

place in the universal Scheme42 is in accord with ideals which have not

basically changed for over 4000 years.43 Furthermore. these values have

been significantly endorsed for over 2000 years by the Confucian system,

which has been supported by the Chinese tripartite approach to reality

through Heaven, Earth, and the Tao, and the ruling emphasis of maintaining

39Roosens E, Creating Ethnicity , 1989, Sage, pp17-18 40Gudykunst W'B. Bridging Differences, 1991, Sage, pp66-67. 41The Chinese have, what Bond has described as, "holistic perception" Bond MH,

Beyond the Chinese Face - Insights from Psychology , 1991, Oxford University

Press, p23. This is exemplified, for example, by Francis Hsu's Rorschach ink-blot

research where the mainland Chinese gave relatively more whole-card, as opposed

to specific-detail responses, than did Chinese Americans, who in turn gave more

than Caucasian Americans. - Referred to in Bond p 23. 42ie Humans model themselves "on the earth; the earth models itself on the Heaven;

the Heaven models itself on the Tao; the Tao models itself on the Nature." - Lao

Tzu, Chapter 25, translation in Chan W-T, A Source Book in Chinese Philosophy,

1963, Princeton University Press, p153. 43Cf In fact, the eminent mythologist Joseph Campbell says the Taoist concept of a

socially manifest cosmic order (a rather matured precipitate of the notion of

harmony), arose in the early Bronze Age – Campbell J, Myths to Live By , 1993

(reprint edition), Arkana, p65.

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harmony in all things.

Unlike many other societies, the phenomenon of Chinese civilization, has

created a vastly penetrating interconnectedness consisting of a social spiritual

philosophical fabric which enmeshes every aspect of life. Nothing is excluded

from this system of being. Law,44 the family structure, relationships,

government, communication, birth, death and even what one eats and the order

they eat in45 are all under the umbrella of this tripartite approach. Thus, "the

traditional Chinese fusion of custom, law and morality ... shimmer before

[one's] eyes, interweaving in intricate patterns until it is no longer easy to

distinguish one component from another."46

In this light, whilst "to a considerable extent contemporary Chinese attitudes

are the product of the Confucian tradition" and a "thorough knowledge of law in

communist China requires an understanding of China's imperial tradition and

legal order",47 an analysis which stopped at the level of legal theory and legal

culture would be inadequate for the purposes of this study as there are

significant "psycho" and "socio"-cultural forces at work during the cross-cultural

negotiation process.

44This applies to the place of law in the system of governance and the practice of it in daily

life. For example the ritual aspect of formalising contracts in the Han Dynasty was "invested

with cosmological significance". Scogin Jr HT, Between Heaven and Man: Contract and the

State in Hon Dynasty China. (1990) 63 Southern California Law Review 1326 at 1326. The

Han view was that "Rites are the meeting-corner of the yin and the yang. [the link]

connecting all the affairs of [men[/women]], that wherewith Heaven and Earth are revered,

the spirits are treated, the order among the high and the lowly is maintained, and the Way of

man[/woman] is kept straight." - PAN KU, 2 PO HU T'UNG (Tjan Tjoe Som trans 1949)

referred to in Scogin Jr HT, Between Heaven and Man: Contract and the State in Han

Dynasty China. (1990) 63 Southern California Law Review, 1326 at 1352-1353.

45De Mente Boye, Chinese Etiquette and Ethics in Business, 1993, NTC, 16. 46Tay AE-S, Law in Communist China - Part 1, (1969) 6, no2 Sydney Law Review 153 at

154. 47Lung-Sheng T, Law in Communist China, read to the Chinese Studies Colloquium at Brown

University, October 30 1969, p30 of the manuscript referred to in Tay AE-S, Law in

Communist China - Part 2, (1969) 6, no2 Sydney Law Review 335 at 337, fn 1.

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As Geertz has noted, "culture patterns - religious, philosophical, aesthetic,

scientific, ideological - are 'programs'; they provide a template or blueprint

for the organisation of social and psychological processes. " 48 And, as Rubin

and Sander believe, culture

is a profoundly powerful organising prism, through which we tend to

view and integrate all kinds of disparate interpersonal information. 49

The cultural fabric of the Chinese, therefore, requires emphasis, as it

reveals how the mind has been programmed.50 And, as Bee Chen Goh states

one needs "to be familiar with the Chinese mental software" if negotiating

with the Chinese is to be successfu1.51

Furthermore, it is necessary to have some understanding of how these

culturally determined elements affect the communication style of the

Chinese negotiator, otherwise much of this information stagnates as theory,

absent of practical application.

For these reasons, the significant "psycho" and "socio" - cultural building

blocks will be examined prior to and as an aid to understanding the legal

cultural forces which affect the Sino-Western negotiation process.

3.1 The Role of Cultural analysis in Sino-Western negotiation

Through identifying the isolates52 - of the Chinese culture we are provided with a looking glass through which we can seek to understand the Chinese

way of being and perceiving." For as

48Geertz C, Ideology (is a Cultural System, in Ideology and Discontent, Apter DE (ed),

1964, New York, p62. 49Rubin JZ & Sander EA, Culture, Negotiation and the Eye of the Beholder, (July 1991)

Negotiation Journal 249 at 249. 50Hofstede G, Culture's Consequences: International Differences in Work-related

Values, 1980, Sage. 51Goh Bee Chen, Negotiating with the Chinese, 1996, Dartmouth Publishing Company,

pvi. 52See Hall Edward T, The Silent Language, Doubleday, 1959, p50. 53As Edward Hall states: culture "is man [and woman] in a greatly expanded

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Keesing notes, culture is an individual's "theory of what his [or her] fellows

know, believe, and mean, his [or her] theory of the code being followed, the

game being played, in the society to which he [or she] was born." 54

This whilst, seeming excessively philosophical or scientific to the pragmatic

observer, provides the Western negotiator with profitable dividends. By the

same token, however, one cannot expect to understand the motivations and

mechanics of a culture or a foreign negotiator in "three easy steps". As Hall

believes, "the job of achieving understanding and insight into mental processes

of others is much more difficult and the situation much more serious than most

of us care to admit." 55 Hence, it is advantageous before proceeding that we

have some concept of the fabric of culture - the framework.

The Chinese, it could be said, have one of the most distinct56 cultures on earth.

This is for two reasons. First, the culture has had time to develop and intensify

because of its ancient age.57 Secondly, the Chinese people for two thousand

years58 have been intensely subjected to the Confucian form of social existence

and way of being, strictly enforced by both society and the administration. The

Confucian teachings were used by the various dynasties as a powerful

mechanism for social conformance control. As Bond and Hwang state the ruling

educated elite

exercised power according to Confucian prescriptions. As cultural

transmitters, they advocated Confucian philosophy as a way of

rationalizing the political and social order by writing

sense. Culture is the link between human beings and the means they have of interacting

with others." - Hall Edward T. The Silent Language, Doubleday, 1959. p213. 57Keesing, R, Theories of Culture. (1974) 3 Annual Review of Anthropology p 73.

Hall Edward T, The Silent Language. Doubleday, 1959, p52. 56For a social system to be qualified as a cultural system, Hall says that it must be

"[c]apable of analysis in its own terms without reference to other systems and so organized

that it contained isolated components that could be built up into more complex units" - The

Silent Language, Doubleday, 1959, p61. 57Many historians argue that the Chinese civilization is the oldest. 58From the Han

Dynasty onwards Confucianism became recognized as the official philosophy of the State -

Fairbank JK & Reischauer EO, China: Tradition and Transformation, Houghton Mifflin.

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legends, drama, folk stories, and folk songs for the peasantry. Thus all

Chinese people were enmeshed in the Confucian tradition.59 (My italics).

In effect it shares some powerful similarities with Chinese Communism60 and

perhaps explains why the Confucian style strongly remains in Chinese

behaviour.61

Both these facts largely explain why,

both in basic assumption and in institutions and practices judicial

administration in contemporary China displays some striking resemblances

to its predecessor under the Chinese empire.62

Furthermore. the Communist continuity factor is especially important to the

cultural argument. For as Hall points out, it is "essential that there be no breaks

with the past"63, if cultural causation is said to be responsible for particular

current human behavior.

The application of Confucianism and the Taoist concept of a socially manifest

cosmic order64 to life in traditional (and ancient) China permeated through

59Bond Michael Harris & Hwang Kwang-Kuo, The Social Psychology of the Chinese

People, in The Psychology of the Chinese People, Oxford University Press. 1986, p

215. 60Traditional China's "agricultural economy tied the vast majority of the population

to the land and its constraints, supporting the peasants at only a subsistence level.

Their livelihood became even more precarious in years of famine when a great

portion of China's huge population faced starvation. This kind of ecological backdrop

predisposed the Chinese peasantry to accept Confucian philosophy, which encourages

restraint over one's desires and unequal distribution of the limited resources among

members of a group (the family in most cases. The educated elite became members

of the ruling class by passing examinations based on the Confucian classics."(My

italics) - Bond Michael Harris & Hwang KwangKuo, The Social Psychology of the

Chinese People, in The Psychology of the Chinese People. Oxford University Press,

1986, p215. 61As Tay states. "there are areas of Chinese Communist ideology and strains within it

where it is not at all easy to distinguish the heritage of Marx from that of Confucius"

- Tay AE-S, Law in Communist China - Part 2, (1969) 6, no2 Sydney Law Review 335

at 335. 62Cohen JA, introduction to Essays on China's Legal Tradition, Cohen JA, Edwards

RR & Chen F-MC (eds.), 1980, Princeton University Press, p4. 63Hall Edward T, The Silent Language, Doubleday, 1959, p52. 64Campbell J, Myths to Live By, 1993 (reprint edition), Arkana, p65.

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Chinese consciousness to the extent that it became rooted in, what Hall has

described as, bio-basic activities65. It has moulded a framework through which

the Chinese interact with their environment, associate through a hierarchical

social structure, subsist, learn66, play67, define their territoriality,

temporality68 and modes of defense69 and methods of exploitation70.

Therefore, Confucianism takes "centre stage in almost all approaches to Chinese

social behavior. "71

65Hall Edward T, The Silent Language, Doubleday, 1959, p60. - this is a

fundamental requirement for any cultural system. 66"Education and educational systems are about as laden with emotion and as

characteristic of a given culture as its language" - Hall Edward T, The Silent Language,

Doubleday, 1959, p71. 67As Hall states "play and learning are intimately intertwined, and it is not too difficult to

demonstrate a relationship between intelligence and play ... games like Chinese checkers

are almost entirely a function of a specific type of intellectual development." Hall Edward

T, The Silent Language, Doubleday, 1959, p75. 68"The balance of life in the use of space is one of the most delicate in nature" - Hall

Edward T, The Silent Language, Doubleday, 1959, p68. The flexible lateral Chinese sense

of and relation to space and is very different from the rigid or linear Westerner's. This is

evidenced in Sino-Western negotiation, which often results in exasperation and frustration

on the part of the Western party. Furthermore. the lateral "harmonious" temporal nature of

the Chinese contrasts heavily with the West. 69

The defensive techniques are evident, as Hall states, in not only warfare, but medicine,

law and religion - Hall Edward T, The Silent Language, Doubleday, 1959, p76. Just as the

analogy Sun Tzu in The Art of War makes to medicine, that minimal action in achieving

ones aim is the true art, similarly the Chinese have applied this rule to litigation and the

Confucian emphasis on harmony. Furthermore. this "style" is evident in the negotiation

process, and the constant attempt to maintain good relations, whilst still achieving the

parties' objectives. 70The Chinese methods of exploiting their environment be it social, commercial or

otherwise is famous and has been embodied in various military texts and philosophies.

Suffice to say maintaining harmony is still the foundation principle, and this requires the

negotiator to be acutely aware of and responsive to one's legal, financial, strategic and the

demands and style of the other side. 71Bond Michael Harris & Hwang Kwang-Kuo, The Social Psychology of the Chinese

People, in The Psychology of the Chinese People, Oxford University Press, 1986, p 214.

- "The essential aspects of Confucianism in constructing a Chinese social psychology are

the following: (a) man [and woman] exists through, and is defined by, his relationships to

others; (b) the relationships are structured hierarchically; (c) social order is ensured

through each party's honouring the requirements in the role relationship." - p216. See also

De Mente Boye, Chinese Etiquette and Ethics in Business, 1993, NTC, p21.

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4. Cultural Perception

As mentioned above in the section on negotiation, perception i s critical

to the negotiation process. Suffice to say, understanding that the other

negotiating team may perceive things differently from us is a fac tor critical to bi-cultural analysis. There is a relationship between people and the way they

perceive things. "Groups", states Hall,

can be defined by the relation of their members to a certain pattern[72].

The individuals of a group share patterns that enable them to see the same

thing and this holds t h e m together.73

This means that if a bi-cultural negotiation is to be held together then a

sufficient commonality of pattern needs to be established.

4.1 Formal, informal and technical patterns of awareness.

As mentioned above, Westerners and Chinese have different patterns of

awareness. Hall says there are three patterns of awareness shaped by culture.

They are formal awareness74, informal awareness75 and technical awareness76.

Whilst all three

72Hall defines a pattern as a "meaningful arrangement of sets shared by a group." Hall

Edward T, The Silent Language, Doubleday, 1959, p149. 73Hall Edward T, The Silent Language, Doubleday, 1959, p148 -9. 74Cultures that "invest tradition with an enormous weight... Formal awareness is an

approach to life that asks with surprise: 'Is there any other way?' Formally aware people

are more likely to be influenced by the past than they are by the present or future." -

Hall Edward T, The Silent Language, Doubleday, 1959, p97-8. 75"Situations in which much of what goes on exists almost entirely out-of -awareness".

This allows for a high degree of patterning. The informal is made up of activities or

mannerisms which once learned becomes so much a part of ordinary life that they are

done unconsciously. In fact as Hall states, they often become blocked when awareness

takes place. Hall Edward T, The Silent Language, Doubleday, 1959, p96. 76This type of awareness contains both informal formal awareness, however in this case i t

is fully conscious behaviour. "Its very explicitness and the fact that it can be written

down and recorded and even taught at a distance differentiates it from the other two

types of integration". - Hall

Edward T, The Silent Language, Doubleday, 1959, p97

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are present in any given situation irrespective of cultural background, the

pattern which will dominate will vary.

The Chinese hierarchical system is formal however a substantial number of

the rules are technical.77 The Westerner, on the other hand, tends to operate

from an informal level of awareness. Furthermore, Westerners tend to

communicate more inattentively78 than Chinese - like on semi-"automatic

pilot".79 Thus, "untold difficulty" is prone to arise in Sino-Western

communication.80

An additional impediment is whilst Westerners, such as

Americans and Australians, have few technical or formal restrictions, they

have many informal ones. As a result Westerners "are apt to be quite

inhibited, because they cannot state explicitly what the rules are. They can

only point to them when they are violated."81 This trait further reduces the

effectiveness of the unaware Western negotiator in a bi-cultural situation.

Additionally, Hall found that the formal, informal and technical patterns were

bound by three laws – order82, selection83 and congruence84. In the

hierarchical structured formal and technical Chinese cultural system, order

plays a significant role, it determines largely in negotiations what is said and

77Hall makes this statement of the Japanese, who share a similar cultural system to

the Chinese. Hall Edward T, The Silent Language, Doubleday, 1959, p 149.

781 say this as, people generally communicate largely on "automatic pilot" as

"much of behaviour is habitual or based on scripts we have learned" - Gudykunst

W. Bridging Differences, 1991, Sage, p26. However, due to the non- technical and

informal nature of Western society this fact applies even more so to the West. 79Gudykunst W, Bridging Differences, 1991, Sage, p26. 80Hall Edward T, The Silent Language, Doubleday, 1959, p96. 81Hall Edward T, The Silent Language, Doubleday, 1959, p151. 82"The laws of order are those regularities governing changes in meaning when order

is altered" - Hall Edward T, The Silent Language, Doubleday, 1959, p155. 83"selection controls the combination of sets that can be used together" - Hall

Edward T, The Silent Language, Doubleday, 1959, p157. 84This is a more complex concept than order and selection, "its subtle dictates",

states Hall, “... may [also] be more binding". "Unlike order and selection, which

have to do with the patterning of sets, the law of congruence can be expressed as a

pattern of patterns." - Hall Edward T, The Silent Language, Doubleday, 1959, p159. It

could be said to exist when one makes use of all the potentials of the pattern.

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when, the roles of each team member, and even, what order the team members

walk into the room. Most importantly however, the Confucian order dictates that

relationship comes before business.85 Furthermore, as one commentator puts it,

the Chinese negotiate in three dimensions - the social aspect, the pre-

contractual aspect and then "really getting down to the give and take after the

contract is signed."86 This contrasts strongly with the Western technique, where

negotiation consists of "two dimensions - presentation and closing (followed by

the smooth implementation of the contract."87 Similarly, the Confucian style

dictates the manner of selection, which is very different from the style of the

West.

Most importantly however, Hall's notion of congruence is embodied in the

principles of Confucius, therefore there is a congruent template of proper action

that the Chinese attempt to adhere and aspire to both consciously and

unconsciously88.

Whilst China's new "socialist market economy", and Western influence, is

presenting Chinese negotiators with another way of doing and seeing things, it

would seem that any substantial departure from the Confucian cultural system

is unlikely. First, because this system is firmly embedded in the Chinese psyche

and Chinese society due to the passage of time and the rigour with which

85"At the interpersonal level ... it appears to be 'Friendship first, competition second", as

the Chinese proverb so neatly puts the issue." - Bond Michael Harris & Hwang Kwang-

Kuo, The Social Psychology of the Chinese People, in The Psychology of the Chinese

People, Oxford University Press, 1986, p 263. 86De Mente Boye, Chinese Etiquette and Ethics in Business, 1993, NTC, 122123. Pye refers

to the Chinese style of negotiation as a two tiered process: "(1) the manifest level of

bargaining about concrete agreements and (2) the latent level at which they are trying to

strike "emotional bargains."" - Pye L, Chinese Negotiating Style: Commercial Approaches

and Cultural Principles, Quorum, 1992, p99. It is this "latent level" which is culturally alien

and unfamiliar to the Western experience of negotiation. Furthermore, for reasons which

will be discussed, unfamiliarity with this level can greatly retard the Sino-Western

negotiation process. 87De Mente Boye, Chinese Etiquette and Ethics in Business, 1993, NTC, 122. 88"As Keesing states "the actor's theory of his [or her] culture, like his [or her] theory of

his [or her] language may be in large measure unconscious. Actors follow rules of which

they are not consciously aware, and assume a world to be "out there" that they have in

fact created with culturally shaped and shaded patterns of mind." - Keesing, R, Theories of

Culture, (1974) 3 Annual Review of Anthropology 73-97 at 89.

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Confucian values, and similar Communist values were enforced. Secondly,

because the Chinese way of negotiation works, to the extent that even Western

negotiators are studying the eastern tactical philosophies, such as the Art of

War. Lastly, the flexible, action based on response style, cohabits infinitely

better, than the rigid Western alternative, in the haphazard unpredictable

Chinese market, and the Chinese communist "feel-as-we go" style of commercial

policy and law making. In fact a s will be discussed below, the Western

negotiator and foreign investor would benefit if they observed the Chinese

manner of handling the unfamiliar Chinese commercial, social and legal climate

rather than struggle with a linear formula which is not suited to the Chinese

situation.

4.2 Time

Another bi-cultural distinction which often frustrates Sino-Western negotiations

is the individual's culturally derived perception of time. Westerner's are, what

Hall89 describes as, "monochronic" - meaning "they compartmentalise time,

scheduling one thing at a time and become disoriented if they have to deal with

too many things at once"90; whilst, the Chinese are "polychronic" - which is

characteristic of collectivistic cultures, tending to undertake multiple tasks at

the same time.

In addition to this, Chinese and Westerners perceive, what we in the West would

call, "inaction", fundamentally differently. In the West, people continually make

a distinction of whether or not a person is engaged in an activity -

distinguishing between the "active" and the "dormant" phases of everything

around them.91 Hall labels this characteristic as "ageric".92 In China, like many

other collectivistic cultures, this distinction is not made. It is for these reasons

that the Chinese negotiators "seem impervious to the possibility that time may

work against them rather than form

89Hall Edward T, The Hidden Dimension, 1967, Doubleday, p162. 90Hall Edward T, The Hidden Dimension, 1967, Doubleday, p162. 91Hall Edward T, The Silent Language, Doubleday, 1959, p178. 92Hall Edward T, The Silent Language, Doubleday, 1959, p178.

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them""; and that "the first rule in negotiating with the Chinese is the need for

abiding patience."94 Because, the way they perceive and relate to time is very

different from that of the Westerner. As Williams states:

We are impatient with delay, or it makes us feel we are wasting time. We

seem to be guided by a metaphor that time is money, and we do not

permit ourselves to waste it. This attitude reduces our effectiveness in

doing business in many countries of the world, where meaningful

interpersonal relationships are necessary preconditions for doing business

together.95

Furthermore, it is especially important that we be aware of these differences as

the Chinese are very aware of the ageric monochronic nature of the Westerners,

and use it very effectively to their strategic advantage.96 An additional reason

that this occurs is due to the observant formal/technical nature of the Chinese

as opposed to the informal nature of the Westerner.

However, whilst we cannot alter the way we perceive, as Hall states, much of

the potential difficulty between the interaction between polychronic and

monochronic people can be avoided through "proper structuring".97 In terms of

negotiation, this means communication and the ability to be flexible and make

allowances in terms of time and scheduling. In other words, as has been the

experience of many Western negotiators,98 making a tight schedule without

accounting for the unexpected is fancifully unrealistic. Such preparation will also

93Pye L, Chinese Negotiating Style: Commercial Approaches and Cultural Principles,

Quorum, 1992, p83. 94Pye L, Chinese Negotiating Style: Commercial Approaches and Cultural Principles,

Quorum, 1992, p58. 95Williams GR, Negotiation as a Healing Process, [1996] No 1 Journal of Dispute

Resolution 1 at 29. 96Pye L, Chinese Negotiating Style: Commercial Approaches and Cultural Principles,

Quorum, 1992, p83-85. As Tay and Leung state the Chinese are "not accustomed to

giving anything away quickly - including revealing their own position. Bu quing chu

("not clear") is the most common response to awkward questions; it is courteous,

laconic and gives nothing away including just who, or what, lacks clarity." - Tay A E-S

& Leung CSC, The Relation Between Culture, Commerce and Ethics, in Tay AE-S & Leung

CSC (eds), Greater China: Law, Society and Trade, 1997, LBC, p6. 97Hall ET, The Hidden Dimension, 1987, Doubleday, p 162. 98See for example case studies 4 (p139) and 6 (p171) in Blackman C, Negotiating China:

Case Studies and Strategies, 1997, Allen and Unwin.

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largely diffuse Chinese attempts to use the Westerner's ageric monochronic

tendencies to their advantage.99

4.3 The relevance of perceptual differences t o negotiation

Therefore, contrary to the majority's unconscious assumption that regardless

of culture one's experience of a particular event will be uniform, Chinese

culture and Western culture, rather, can be said to be relative to each other on

the pattern level. It is now being realised that people

have no direct contact with experience per se but that there is an

intervening set of patterns which channel ... [their] senses and ...

[their] thoughts, causing ... [them] to react one way when someone else

with different underlying patterns will react as ... [their] experience

dictates. 100

As Hall states, 101 a lack of awareness about ones cultural patterns can lead to

serious financial mishaps. It is, furthermore, for this reason,

that one of the most promising developments in the intercultural field

has to do with research directed towards bringing informal patterns to

awareness. 102

Much would be gained if the Western negotiator, who has a tendency towards

informal awareness, negotiated from the elevation of technical awareness,

coupled with a knowledge of the cultural make-up of his or her Chinese

counterpart.

99"It is better to sense out the situation and the people involved, to make haste slowly,

to ensure or pretend that all parties are satisfied." - Tay A E-S & Leung CSC, The

Relation Between Culture, Commerce and Ethics, in Tay AE-S & Leung CSC (eds), Greater

China: Law, Society and Trade, 1997, LBC, p6. 100Hall Edward T, The Silent Language, Doubleday, 1959, p145-6. 101Hall Edward T, The Silent Language, Doubleday, 1959, p153. 102Hall Edward T, The Silent Language, Doubleday, 1959, p153.

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Whilst, it would be unwise and, in Halls vocabulary, "incongruous", to attempt

to imitate the content of the culture and out do the Chinese,103 much is to be

gained from understanding and applying knowledge of its dynamic. As Pye

states

Effective negotiation requires a constant alertness to the distinctive

qualities of the Chinese to appreciate the meaning behind their actions,

so as not to be misled or to mislead them.104

Therefore rather than dangerously performing to a cultural script, the Western

negotiator can predict and understand the culturally motivated behaviour, and

apply it to negotiation strategy.

5. Individualism and Collectivism

Individualism and collectivism, concepts similar to egocentrism and

homocentrism, is "the major dimension of cultural variability used to explain

...[Sino-Western] differences in behaviour.”105

In Chinese, collectivistic, behaviour the individual sees their self as a part of

the social whole. Their sense of identity and the way they see the world is

perceived through their relationships and the groups they belong to . 106 Group

goals take precedence over individual goals. It is for this reason that the

problem for the Chinese “has always been how to make the individual live

103For "one can only act superficially in accordance with the rules of the Chinese

culture." - Pye L, Chinese Negotiating Style: Commercial Approaches and Cultural

Principles, Quorum, 1992, p110. To become a real part of a culture, we really need to

be born into it with the appropriate genes (Muhlmann H, The Nature of Cultures - A

Blueprint for a theory of Culture Genetics, 1997), and be constantly subjected to the

intertwining fabric it threads through and around us. 104Pye L, Chinese Negotiating Style: Commercial Approaches and Cultural Principles,

Quorum, 1992, p110. 105Gudykunst W, Bridging Differences, 1991, Sage, p45. See Hofstede G, Cultures

Consequences, 1980, Sage; Kluckkohn F & Strodtbeck F, Variations in Value

Orientations, 1961, Row Peterson; and Triandis HC, Collectivism v Individualism, in

Cross –Cultural Studies of Personality, Attitudes, and Cognition, 1988, Macmillan. 106Triandis HC, Cross-Cultural Studies of Individualism and Collectivism, in Berman J

(ed), Cross-Cultural Perspectives, Nebraska Symposium on Motivation 1989, University

of Nebraska Press, 1990, p81.

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according to accepted customs and rules of conduct, not how to enable him

[or her] to rise above them."107 This psychological orientation is inextricably

connected with Confucian (and Communist) ideology.

In the West, on the other hand, the reverse applies. The individualist identifies

their self from an isolated view point focused toward realising their own unique

set of talents and potentials.108

Whilst collectivistic people give priority to group goals, they do distinguish

between out groups and in groups109.

Thus whilst the Western individualist tends to be universalistic and apply the

same standards to all, the Chinese collectivist tends to be particularistic and,

therefore, applies different value standards to members of his or her "ingroups"

and "outgroups".110 An ingroup 'is a group whose norms, goals and values shape

the behaviour of its members".111 An outgroup, on the other hand, "is a group

with attributes dissimilar to those of the ingroup, whose goals are unrelated or

inconsistent with those of the ingroup, or a group that opposes the realisation of

ingroup goals (competing)". 112 Furthermore, strength of identity with a group,

"introduces the risk of apathy about or even hostility towards other groups."113

Therefore there are limits to growth if this dynamic is encouraged. Also,

potential outward displays of conflict are largely absent due to the Confucian

107Hsu FLK, Americans and Chinese: Passage to Differences, (3rd ed), 1981, The University

Press of Hawaii, p135. 108Waterman A, The Psychology of Individualism, 1984 Prager, p4-5. 109Also known as collectivities: Hofstede G & Bond M, Hofstede's Culture Dimensions,

(1984) 15 Journal of Cross-Cultural Psychology, 417. 119Gudykunst W, Bridging Differences, 1991, Sage, p46. 111Triandis HC, Cross-Cultural Studies of Individualism and Collectivism, Berman J (ed),

Cross-Cultural Perspectives, Nebraska Symposium on Motivation 1989, University of

Nebraska Press, 1990, p53. 112Triandis HC, Cross-Cultural Studies of Individualism and Collectivism, Berman J (ed),

Cross-Cultural Perspectives, Nebraska Symposium on Motivation 1989, University of

Nebraska Press, 1990, p53. 113Redding G & Wong GYY, The Psychology of Chinese Organizational Behaviour, in The

Psychology of the Chinese People, Oxford University Press, 1986, p 262.

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26

emphasis of harmonious relationships. 114

Therefore, a Western negotiation team is perceived as an outgroup at the

beginning of the negotiation process. However, "such grouping is perceptual and

changes in accordance with one's association. "115 Thus, the success of the

negotiations will largely depend on the Western team's ability to become an

ingroup"116 - a fact which most Western teams are oblivious to. This also

basically explains why the first dimension117 of Chinese negotiation is regarded

as a social one.

As will be discussed, the collectivist orientation of the Chinese also helps to

explain why "the main characteristics of Chinese law are to found in the concept

of family and in the ideology of the stratification order."118

Furthermore, individualism and collectivism provides a powerful explanatory

framework for understanding cultural variances in Sino-Western communication,

fundamental to the negotiation process.” 119

114See below. To see an analysis on the dynamic process of coping with interpersonal

conflicts in Chinese culture see - Bond Michael Harris & Hwang Kwang-Kuo, The Social

Psychology of the Chinese People, in The Psychology of the Chinese People, Oxford

University Press, 1986, p 263. 115Goh BC, Cross-Cultural Perspectives on Sino-Western Negotiation, (November 1994)

Australian Dispute Resolution Journal 268 at 272, where the author refers to Triandis HC,

Cross-Cultural Studies of Individualism and Collectivism, in Berman J (ed), Cross-Cultural

Perspectives, Nebraska Symposium on Motivation 1989, University of Nebraska Press,

1990, p81. 116It is for this reason that Blackman observes that "[b]ecause the Chinese use different

rules for out groups, it is important for Westerners, the ultimate outsiders, to move the

ground inside the Chinese camp." Blackman C, Negotiating China: Case Studies and

Strategies, 1997, Allen and Unwin, p16. It is also due to this that it is acceptable for the

collectivistic Chinese to cheat a person in business transactions whilst they remain a

stranger: See Triandis HC, Cross-Cultural Studies of Individualism and Collectivism, in

Berman (ed), Cross-Cultural Perspectives, Nebraska Symposium on Motivation 1989, 1990,

University of Nebraska Press, p73. 117See above. 118Ch'u T-T, Law and Society in Traditional China, 1965, Mouton & Co, p10. 119Gudykunst W, Bridging Differences, 1991, Sage, p50.

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6. Sino-Western Communication

Having "pattern awareness", referred to by Hall, and an alertness to the

distinctive qualities of the Chinese, that Pye refers to, contributes to the

importance of having a heightened awareness of how we communicate, what

Howell120 calls "conscious competence" - where we think about our

communication behaviour and consciously modify it to improve our

effectiveness. Gudykunst labels this state of attention in communication as

"mindfulness"121.122 Having this awareness will prevent "polarised

communication''123, which inevitably leads to or endangers a breakdown in

negotiations. 124

Similarly, having this awareness also entails an awareness of the distinction

between the "content"125 and "relationship"126 dimensions of a message. 127

When humans communicate we "combine a set of symbols into messages that

we encode to send to others".128 Similarly, we engage in a process of decoding

every time we receive a message and seek to understand its meaning. This

encoding and decoding is embodied in our cultural, sociological and

psychological background." 129 As, mentioned above, these three contributors are

120Howell WS, The Empathic Communicator, Wadsworth, 1982. 121Ellen Langer, another advocate for this principle identifies three qualities of mindfulness:

"(1) creation of new categories; (2) openness to new information: and (3) awareness of

more than one perspective". - Langer E. Mindfulness, 1989, Addison-Wesley, p62. 122Gudykunst W'B, Bridging Differences, 1991, Sage, p4. 123"[T]he inability to believe or seriously consider one's view as wrong the other's opinion as

truth" - Arnett RC, Communication and Community, 1986, Southern California University

Press, p15-16. 124As Gudykunst states - "polarised communication exists when groups or individuals look out

for their own interests and have little concern for other's interests''. - Bridging Differences,

1991, Sage, p5. Clearly this factual matrix is present in the pre and post contractual

negotiation process. 125The information in the message - eg what is said. 126How the message is transmitted and how the participants relate to each other. 127Watzlawick P, Beavin J & Jackson D, The Pragmatics of Human

Communication. 1967, Norton. 128Gudykunst W, Bridging Differences, 1991, Sage, p8. 129Miller G & Steinberg M, Between People, 1975, Science Research Associates.

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all tightly knitted into one another through China's Confucian heritage. Also, as

explained in the discussion on Sino-Western perception and culture in 2.1, the

thoughts, feelings, emotions, attitudes, values and experiences of the Chinese

are quite different from those in the West.

Therefore, an important acknowledgment especially for the bicultural negotiator,

is that "communication is effective to the extent that the other person attaches

a meaning to the message similar to what we intended."130

Furthermore, during any negotiation the parties make cultural, social and

psychological predictions131 about how each other will respond. However, in the

bi-cultural arena we cannot base our predictions of ones behaviour on our own

culturally motivated rules and norms. "This", as Gudykunst states, "will

inevitably lead to misunderstanding." 132 For this reason alone, if a Western

negotiator wishes to communicate effectively with the Chinese he or she "must

use [his or her] knowledge ... [of the Chinese culture] to make predictions" 133.

If the Western negotiator has little or no knowledge of the Chinese culture then

they have "no knowledge... for making predictions." 134 This scenario is

Potentially fatal in the Sino-Western negotiation process.

Obviously this theorem, applies equally to the Chinese. However it is

compounded by their collectivist nature, as there "is a n increased chance of

misunderstandings occurring because ... [they] are likely to interpret others'

behaviour based on ... [their] group me memberships. ''135

130Gudykunst W, Bridging Differences, 1991, Sage, p9. 131"When people communicate they make predictions about the effects, or outcomes. of

their communication behaviours; that is they chose among various communicative

strategies on the basis of predictions about how the person receiving the message will

respond." - Miller G & Steinberg M, Between People. 1975, Science Research Associates. 132Gudykunst

W W

Gudykunst

W

Gudykunst

W

W Bridging Differences, 1991, Sage, p18. 133Gudykunst

W st W, Bridging Differences, 1991, Sage, p18.

134Gudykunst

W t W, Bridging Differences, 1991, Sage, p18.

135Gudykunst

W t W, Bridging Differences, 1991, Sage, p21.

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6.1 High-context and low-context communication

As referred to above, the collectivistic-individualistic orientation of a person

affects how a message is communicated. The Chinese collectivist culture

engages in high context communication - where "most of the information is

either in the physical context or internalised in the person, while very little is

in the coded, explicit. transmitted part of the message." 136 The Western

individualist cultures, on the other hand, communicate with "the mass of

information ... vested in the explicit code." 137

Furthermore, as illustrated below, this high and low context distinction helps

to explain how "individuals are dominated in their behaviour by", what Hall

has described as, "complex hierarchies of interlocking rhythms."138 As Bond

points out, this observation "is rich and consistent with a host of

observations about the Chinese, especially those concerning their negotiation

behaviour.” 139 Specifically, in high context cultures much more attention is

paid to the interaction process itself, and as a result "getting into synch" has

become necessary for an exchange to succeed. 141

As stated by Gudykunst, "the level of context influences all other aspects of

communication"141:

High-context cultures make greater distinction between insiders and

outsiders than low-context cultures do. People raised in high-context

systems expect more of others than do the participants in low-context

systems. When talking about something that they have on their minds,

a high-context individual will expect his [or her] interlocutor to know

what's bothering him [or her], so that he [or she] doesn't have to be

specific. The result is that he [or she] will talk around and around the

136Hall ET. Be yond Culture, 1976, Doubleday, p79. 137Hall ET. Be yond Culture, 1976, Doubleday, p70. 138

Quoted in Bond MH, Beyond the Chinese Face - Insights from Psychology, 1991.

Oxford University Press, p51. Source not specified. 139

Bond MH. Beyond the Chinese Face - Insights from Psychology, 1991, Oxford

University Press, p51. 140

Bond MH, Beyond the Chinese Face - Insights from Psychology, 1991, Oxford

University Press, p51. 141Gudykunst W, Bridging Differences, 1991, Sage, p50.

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point, in effect putting all the pieces in place except the crucial one.

Placing it properly - this keystone - is the role of his [or her] interlocutor. 142

(My italics).143

This observation is highly relevant to Sino-Western arena, as the placing of

the keystone rests on the unfamiliar low-context Western negotiator.

Therefore, the competency of the Western negotiator to undertake this

responsibility, may be crucial.

Another relevant factor, is the Chinese fundamental concern with

maintaining interpersonal harmony which explains the typical structure of

Chinese discourse. As has been commonly observed,

Chinese discussants first present the common problems and

contextual restraints which are binding on all the participants, before

stating their own position. This strategy results in their appearing

diffident and vague to most Westerners, but effectively prevents a

polarisation of positions and resulting conflict among the

participants. 144

In this way. the Chinese believe that hostility is avoided, as thereby is

loss of face, yet control over the outcome of the dispute is maintained. 145

However, as case studies indicate, the typical structure of Chinese

discourse is not obviously effective in the bicultural situation, as it is not a

structure common to both parties. "The cultural differences here", states

Bond, "revolve around.

142Hall ET. Beyond Culture, 1976, Doubleday, p98.

143Another for this behaviour, is that it is a way for the Chinese to maintain face".

One study has shown that the involvement of face is common in Chinese

negotiation and financial decision making - Redding SG & Ng M. The Role of Face in

the Organizational Perceptions of Chinese Managers. (1982) Organization Studies, 3,

pp201-19. As De Mente states, "in all relationships, personal and business, it is

critical to the Chinese that they maintain "face" and avoid of fending the "face" of

others. ... Failure to preserve the [face] of others is tantamount to robbing them

of their social status and bringing great humiliation to them." De Mente B, Chinese

Etiquette and Ethics in Business, 1993, NTC, p61. 144Bond Michael Harris & Hwang Kwang-Kuo, The Social Psychology of the Chinese

People, in The Psychology of the Chinese People, Oxford University Press, 1986, p 262.

See also Young LWL, Inscrutability Revisited, in Gumperz (ed), Language and Social

Identity, 1982, Cambridge University Press, pp72-84.

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contrasting expectations about the consequences of direct versus indirect

approaches to potentially volatile situations." 146 Consequently, negotiations

often break down for this reason.

Furthermore, the high-context style of the Chinese people helps to explain147

their preference for generalised, simple and short contracts, 148 and their

tendency towards drafting vague generalised legislation. 149 However, as

discussed, this style of drafting also allows the contract or legis lation to be

compatible with the unpredictable political and legal climate.

7. The place of law and the basis of contractual obligation

The Chinese perception of and attitudes toward contractual negotiation and

dispute resolution can only be seen when viewed against the traditional

backdrop of Confucianism, its tripartite basis. and the consequential

subordinate place of law. For as Scogin states "[t]he continuing effect of

traditional values and assumptions on current practices is apparent to those

engaged in the process of negotiating and effectuating contracts in China

today." 150

145Bond MH, Beyond the Chinese Face - Insights from Psychology, 1991, Oxford

University Press, p66; and Blackman C, Negotiating China: Case Studies and

Strategies, 1997, Allen and Unwin, p4.

146Bond MH, Beyond the Chinese Face - Insights from Psychology, 1991, Oxford University

Press, p66. 147For contract and legislation are in essence a set of promises and reliance , embodied in a

form of formalised communication. In effect it is an encoded message subject to the same

high and low context forces that accompany any message. 148eg De Mente Boye, Chinese Etiquette and Ethics in Business, 1993, NTC, 121: and Chu

C-N, The Asian Mind Game, 1995, Stealth, p288. 149Nb Parker RB, Law, Language and the Individual in Japan and the States. (1988) 7 No 1

Wisconsin International Law Journal 179 at 200: - "If it is true that Japan is a society of

'contextuals' [or collectivists] rather than 'individuals' and that the use of language in Japan

is highly contextual [ie high context], then we should expect that law in Japan to also be

'contextual'. It is." 150Scogin Jr HT, Between Heaven and Man: Contract and the State in Han Dynasty China,

(1990) 63 Southern California Law Review, 1326 at 1327. See also, Tay AE-S, Law in China -

Imperial, Republican, Communist, Centre for Asian Studies, The University of Sydney, Annual

Lecture on Asian Studies, No3, 1986.

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The benefit of such a comparative analysis in China's case is particularly

useful due to it's unique "static "154 legal history, in which for over two

thousand years "the fundamental conditions which determined the

structure of Chinese society remained unchanged.” Because of this, "the

influence of the ancient structure of Chinese society and of ancient Chinese

law, as well a s of the Chinese views on the function of law, remains to this

day - in the fields both of public and of private law." 153

7.1 The Structure

Traditional Chinese law154 was not formulated on Western notions, rather it

was a mechanism which was used to maintain order, and not as in the

West, to provide a system by which to live by and under. Where the rule of

law rules, the separation of powers doctrine applies and all are perceived

equal.155 In fact the bedrock of Confucian ideal is irreconcilably different

from the Western notion of law as it

denied that uniformity and equality were inherent in any society. [It]

emphasised that differences were in the very nature of things and that

only through the harmonious operation of these differences could a

151 In using the expression "static", I am not asserting that the legal history was

stagnant, as Scogin may assert. Rather, whilst, as Scogin argues, the response to

contract has been "anything but static", the fundamental conditions which

determined these responses, essentially, have not. See Scogin Jr HT, Between

Heaven and Man: Contract and the State in Han Dynasty China, (1990) 63 Southern

California Law Review, 1326 at 1328 - 1329 and Fn 10. 152Hulsewe AFP in his foreword to Ch'u T-T, Law and Societv in Traditional China, 1965,

Mouton & Co, p2. 153Hulsewe AFP in his foreword

foreword

f

o

r

e

w

o

r

d

t

o

to Ch'u T-T, Law and Society in Traditional

China. 1965. Mouton & Co, p2. C

o

,

p

2

.

M

y

i

i

My italics. 154I use this expression loosely a

s

as a mode to Western understanding,

and and subscribe to the conceptual l imitations enunciated by such c ritics as Stephens

- see FN 199 and accompanying text. In addition, as Needam and Granet observe,

"the idea of predetermined, rig id, universal imperatives governing conduct and

imposing order from without is not there" : Stephens TB. Order and Discipline in

China, 1992, University of Washington Press, p8. 155This structural difference has occurred due to fundamentally different

metaphysical orientations.

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33

fair social order be achieved. 156

Furthermore, the attitudes associated with this approach, have not

swayed.157 Bond states, that a unifying theme running through Chinese

behaviour today is

The Chinese belief in the naturalness, necessity, and inevitability of

hierarchy. It is self-evident to the Chinese that all men [/women] are

born unequal. An efficient society requires a broadly accepted

ordering of people. The alternative to hierarchy is chaos (luan) and

anarchy which are together worse than a harsh authority.158

Essentially law was and still is perceived by the Chinese as only a device

with which to rectify discord.159 And, that its effect on society is

temporary.160 "The elimination of disputes and disorder", states Ch'u, was

"the minimum requirement for maintaining the social order". 161 This stance

is well illustrated with the medical analogy given by Sun Tsu in The Art of

War, where the most effective practitioner is the one whose patients never

get sick. Litigation was perceived as evidence of the sickness of a society

because the Chinese "moral absolute is all on the side of

156Ch'u T-T. Law and Society in Traditional China, 1965, Mouton & Co, p227. is for this

reason that Cohen stresses the need for a "particularistic analysis" of the

continuity/change arguments in relation to the PRC and its traditional past - Cohen

JA, introduction to Essays on China's Legal Tradition. Cohen JA, Edwards RR & Chen

F-MC (eds.), 1980, Princeton Universitv Press, p4. 157See also text accompanying fn 13 158Bond MH. Be yond the Chinese Face - Insights from Psychology, 1991, Oxford

University Press, p118. 159As Ch'u states "law ...was subordinated to li and ethics", it was an instrument

for implementing li. "Law was seen as more or less identical to punishment. which

was invoked whenever li or moral principles were violated. Consequently, law

played only a secondary role in society. It failed to develop a body of rules

independent of li and ethics." - Ch'u T-T, Law and Society in Traditional China, 1965,

Mouton & Co, p283-4. In its modern day socialist market application, as Deng

Xiaoping argued, "law must be used to establish stability and order for economic

development." Chen J. China: Constitutional Changes and Legal Developments, in Tay

AE-S & Leung CS (eds), Greater China: Law, Society and Trade, 1995, LBC, 141.

Referring to Deng Xiaoping, Implement the Policy of Readjustment, Ensure Stability

and Unity, in Selected Works of Deng Xiaoping, 1984, Foreign Languages Press, p335-

355. 160Ch' u T-T, Law and Society in Traditional China, 1965, Mouton & Co. p250. 161Ch'u T-T, Law and Society in Traditional China, 1965, Mouton & Co, p239.

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peace." 162 Litigation did not support the Chinese moral absolute. Nor does

it currently do so.

Instead, true order, rather than being outwardly maintained, was self

regulated and maintained through "a body of approved behaviour

patterns"163. The reason being that:

If the people be led by laws, and uniformity sought to be given them

by punishments, they will try to avoid the punishment, but have no

sense of shame ... If they be led by virtue, a n d uniformity sought

to be given them by the rules of propriety, they will have the sense

of shame and moreover will become good. 164

Therefore, theoretically this approach avoided the need for law. The focus,

thus, turned towards self-cultivation. The rationale for this is deduced in

the Great Learning:

The ancients who wished to illustrate illustrious virtue through the

kingdom, first ordered well their own states. Wishing t o order well their

states, they first regulated their families. Wishing to regulate their

families, they first cultivated their persons.165

This was sought through the li, which Ch'u def ines as "the rules of

behaviour varying in accordance with one's status defined in the various

forms of social relationships." 166 Another enlightening definition is:

the rules of propriety, that furnish the means of determining the

(observances towards) relatives, as near and remote; of

162Fairbank JK, Varieties of the Chinese Military Experience, introduction in Chinese

Ways in Warfare, Kierman Jr FA & Fairbank JK (eds.), 1974, Harvard University

Press, p7. 163Ch'u T-T, Law and Society in Traditional China, 1965, Mouton & Co, p230. 164Lun Yu Chu-Su, 2, 1a-b; Legge, Chinese Classics, I, 9: Ch'u T-T, Law and

Society in Traditional China, 1965, Mouton & Co, p251. 165Li chi chu-su, 60, la; Legge, Texts of Confucianism, IV, 411-412; Couveur, Li Ki, II,

156 referred to in Ch'u T-T, Law and Society in Traditional China, 1965, Mouton & Co,

p255, fn 160. 166Ch'u T-T, Law and Society in Traditional China, 1965, Mouton & Co, p230-231.

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settling points which may cause suspicion or doubt; of distinguishing where

there should be agreement, and where difference; and of making clear what is

right and what is wrong.167

Philosophically, it was an attempt to align human activity with the tripartite

structure, seeking to achieve perfect harmony in all relations. However, of

more immediate concern to the administration, the li was a mechanism which

was "able to divide the people, to cause them to have the classes of poor and

rich of noble and inferior, so that everyone would be under someone's

control."168

It is for these reasons why, Ch'u observes that, the "main characteristics of

Chinese law are to be found in the concept of family and in the ideology of

stratification order."169

7.2 Relationship-The basis of contractual rights

The backbone of the concepts of family and the ideology of stratification order,

was the single minded emphasis on the maintenance of and harmony in all

relationships. In order to realise this abstract ethical and moral principle, "li

were formulated to regulate the expected, reciprocal attitudes and behaviour

between persons occupying different social statuses."170 It was due to these

differentiations, manifestly crystallised in wu-lun - the five human

relationships, that the Confucianists believed their ideal society would be

realised on the basis of "human relationship". 171

167Li Chi C0u-Su, 1, 6a; Legge, Texts of Confucianism, III, 63; Couvreur, Li Ki, I, 3:

in Ch'u T-T, Law and Society in Traditional China, 1965, Mouton & Co, p232. 168Hsun Tzu, 5, 4a; Dubs, I, Works of Hsuntze, 65: in Ch'u T-T, Law and Society in

Traditional China, 1965, Mouton & Co, p233. 169Ch'u T-T, Law and Society in Traditional China, 1965, Mouton & Co, p10. 170Ch'u

T-T, Law and Society in Traditional China, 1965, Mouton & Co, p234. 171Ch'u T-T, Law

and Society in Traditional China, 1965, Mouton & Co, p236.

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Therefore, relationship not law became the linchpin of society. Similar to the

Gemeinschaft strain, traditional Chinese justice was "based on the primacy of

traditional social relationships and not on the primacy of the right-and-duty-

bearing individual, on social ties rather than contractual obligation." 172 It was

virtue not law which was the chief mechanism for ensuring the execution of

contractual duties.173 Rather, legal sanction was used to enforce "the principles

and spirit of the li together with its concrete rules of behaviour." 174

Therefore, to seek adjudication of a dispute under this umbrella was seen as not

only an indignity but as a personal failure and a s a failure of the officials 175, as

a failure of the Imperial Government and as a failure of Heaven176. It meant

that harmony, for which everything stood, had not been maintained. This is why

Confucius considered "the state of no litigation as the ultimate end."177

Furthermore, under this virtuous umbrella the rights of the individual were and

remain today subject to the nature of the circumstance they are said to arise in,

"as their rights are relative and arise from changing human and social

relationships and corresponding duties."178

Instead, the emphasis was and is on obligations and duties which maintains

harmonious relationships and therefore order. Thus, whilst it could be said that

172Tay AE-S. Law in Communist China - Part 1, (1969) 6, Sydney Law Review 151 at 156. 173See Ch 'u T-T. Law and Society in Traditional China, 1965, Mouton & Co, p244-5. 174Ch'u T-T, Law and Society in Traditional China, 1965, Mouton & Co, p274. 175For example. before the Chancellor of the Kingdom of Chiao-tung "went out to hear a

case, he always closed his door and placed the blame on himself. Sometimes he went to the

village to effect a compromise. Thereafter litigation was greatly reduced. Some officials even

acknowledged their faults and resigned." - Hou-Han shu, 64, 3a referred to in Ch'u T-T, Law

and Society in Traditional China, 1965, Mouton & Co, p253. 176Conversely, a document on court procedure from around 1300 AD for example instructed

that if guilt was not found "all [should] stand in awe of Heaven's majesty." - The Book of

Documents, Karlgren B (trs) in Bulletin the Museum of Far Eastern Antiquities 22, Stockholm

1950, referred to in Van Gulik RH, T'ang-Yin-Pi-Shih, Leiden, 1956, p49. 177Lun Yu Chu-Su, 12, 4b; Legge, Chinese Classics, I, 121: in Ch'u T-T, Law and Society in

Traditional China, 1965, Mouton & Co, p249. 178Kim HI, Fundamental Legal Concepts of China and the West, 1981, Kennikat Press,

p121.

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there were contractual rights per se, which were, contrary to popular

speculation,179 claimed and duly enforced from the inception of the legal

system,180 these rights were founded on a collectivistic notion which considered

the individual only against the wider social spectrum.181 It is for this reason that

when a breach occurred and relief was sought, the alleged breach was measured

through the circumstances which motivated it. 182

179For example one distinguished treatise states "[t]he penal emphasis of this law, for

example, meant that matters of a civil nature were ... ignored by it entirely (for example,

contracts)." - Bodde D & Morris C, Law in Imperial China 4 (1967); similarly, see the

comment of CH Peake quoted in Fairbank J, The United States and China, (rev. ed 1958),

p96, referred to in Brockman RH, Commercial Contract Law in Late Nineteenth-Century

Taiwan, in Essays on China's Legal Tradition, Cohen JA, Edwards RR & Chen F-MC (eds),

1980, Princeton University Press, p131 Fn 16; And, Tay AE-S, Law in Communist China -

Part l, (1969) 6, Sydney Law Review 153 at 160: "Law was thus concerned with State

interest; there was no conception of civil law as a State matter, of the resolution of

disputes or the determination of rights by an impartial legal order." However even today,

some writers still persist in a dogmatic uncompromising fashion with the idea - eg Lee TV,

Risky Business: Courts, Culture, and the Marketplace, (1993 ) 47 University of Miami Law

Review 1335 at 1337: "The idea of law as a means to bring order to commerce was alien to

China." 180Scogin Jr HT, Between Heaven and Man: Contract and the State in Han Dynasty China,

(1990) 63 Southern California Law Review, 1325. Specifically at 1329. Some caution is

necessary in resorting to this research. On closer inspection, it is revealed that many of the

findings are academic implications, albeit strong ones. As Scogin points out at 1349, it

must be noted that the factual details of the Han documents which have been found, do not

reveal their legal significance. Therefore, any deductions made as to whether the

documents embody a notion of obligation, is by inference only. Similarly, therefore, as

Scogin prefaces his observations, "the real extent of party discretion to the terms of these

obligations is unknown."(At 1353). Furthermore, to what extent the rights were claimed

and enforced is unclear due to "the extreme paucity of the sources" - Scogin Jr HT,

Between Heaven and Man: Contract and the State in Han Dynasty China, (1990) 63

Southern California Law Review, 1326 at 1336. Furthermore, it is basically impossible

(today, let alone over two thousand years) to accurately assess the extent to which

disputes were settled prior to litigation. It should also be noted, however, that the extent

of litigation whilst present, was still small in comparison to extra-judicial means. 181As Scogin states "The sharpest contrast is found in the ritual process [of creating a

contractual obligation between the parties]. The Roman rituals were essentially unilateral

and gave one party an absolute rights or power, which the other party acknowledged.

These rituals could be conducted reciprocally, but their legal significance was not

determined by the fact of reciprocity. The Han rituals and their predecessors, on the other

hand, expressed an ongoing relationship with moral significance. Generally, rituals were

invested with cosmological forces during the Han. Heaven and man [/woman] were seen as

a continuum, with rituals serving to create order and harmony."- Scogin Jr HT, Between

Heaven and Man: Contract and the State in Han Dynasty China, (1990) 63 Southern

California Law Review, 1326 at 1375. 182Such a stance was also founded on Taoism. See below.

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As Tay states, in drawing a comparison with the Gemeinschaft type of social

regulation, the individual

is not there as an abstract right-and-duty bearing individual, as just a

party to the contract or as the ower of a specific and limited duty to

another. Justice is thus substantive, directed t o a particular case in a

particular social context and not to the establishing of a general rule and

precedent.183

7.3 Contemporary contract dynamic

Therefore, rights did not create relationships, relationships created rights. This

structural variance to the Chinese form of obligation goes far in articulating

the Chinese approach to contract drafting and execution. It also explains why

even today in China "duties created by contracts are not closely linked to the

possibility of remedial action"184 and why there is "[no] evidence of the

existence of well-articulated principles conditioning the remedies for violation

of a contract." 185 Rather as a brief discussion186 on inter enterprise

agreements points out, the party injured by its contractual breach must handle

economic problems arising from the breach "in the spirit of seeking truth from

facts", which as Lubman187 states, "seems to imply that enterprises must not

rely legalistically on the contract as the exclusive source of the parties' duties

...".

An additional dimension to understanding the Chinese attitude to contract is

the typically Taoist conceptual framework of the Chinese in responding to

182Such a stance was also founded on Taoism. See below. 183Tay AE-S. Law in Communist China - Part 2, (1969) 6, no2 Sydney Law Review 335

at 338. 184Lubman S, Methodological Problems in Studying Chinese Communist "Civil Law", in

Contemporary Chinese Law, 1970, Harvard University Press, p256. 185Lubman S, Methodological Problems in Studying Chinese Communist "Civil Law", in

Contemporary Chinese Law, 1970, Harvard University Press, p256. 186Sung Chi-Shan, A Brief Discussion, p65 (translation modified) in Lubman S,

Methodological Problems in Studying Chinese Communist "Civil Law", in Contemporary

Chinese Law, 1970, Harvard University Press, p256. 187Lubman S, Methodological Problems in Studying Chinese Communist "Civil Law", in

Contemporary Chinese Law, 1970, Harvard University Press, p251.

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39

market forces. This framework places a different emphasis on the role of

contract and the place of law in determining obligation.

In his revealing paper on the Han Dynasty188 Scogin refers to traditional

attitudes which provide clarity on the current trend, he states:

in the syncretic milieu of early Han thought, which was influenced by

Taoism, laws and institutions could be legitimate and effective only if

they were in harmony with the cosmos. The Taoists believed, however,

that knowledge of the workings of the cosmos was beyond human

capacities. The contradiction arising from the need to accord with that

which was unknowable was symptomatic of the contradictions

underlying all phenomena. For the Taoists, this contradiction could be

accommodated only by a policy of adaptability and flexibility. Thus. they

felt that laws should be kept to a minimum as n o t to disrupt the

natural order.189 (My italics).

Today, the Chinese still adopt this idiosyncratic response to contractual

execution, namely, obligations which would b e hindered by market forces

should be avoided. Whilst, the commercially minded Chinese parties do not,

on the large, consciously adopt the Taoist philosophy in dealing with their

obligations, it is, as stated above, an entrenched cultural response which is

part of the Chinese mindset. As Chu comments of modern dav commercial

habits:

The Chinese feel that any decision, agreement or contract can be

modified to respond to changed circumstances. Those engaging in

business with the Chinese should not be surprised to have the Chinese

request changes at any phase of a project, even long after the contract

is signed and work has begun.190

188"Emerging in 207BC, "the Han was the first enduring, unified Chinese empire." It

was the "first dynasty to establ ish a long-lasting and universal legal system", and

it "saw written contracts acquire legal as well as moral significance." - Scogin Jr

HT, Between Heaven and Man: Contract and the State in Han Dynasty China, (1990) 63

Southern California Law Review, 1325 at 1334 -1335. 189Scogin Jr HT, Between Heaven and Man: Contract and the State in Han Dynasty China,

(1990) 63 Southern California Law Review, 1326 at 1388. 190Chu C-N, The Asian Mind Game, 1995, Stealth, p240.

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To adapt and be flexible to change, simply makes sense to the Chinese. As

referred to in the introduction to this paper, it is also a necessity in doing

business in China where the commercial atmosphere is haunted by "the all-

pervasive influence of politics"191 and commercial unpredictability. 192

The notion of fixidity, as implied through Western contractual tradition is

unnatural and uneconomical in this environment.

However, this Taoist response, is also collectivistically motivated,193 as it is not

the means but the end which is important in order that the group's objectives

are met,194 and in the Chinese view if a contractually impermissible variation is

required so as to ensure that the parties still profit then it is justified. The

emphasis is on the retention of the relationship, not on the contract which is

regarded as cosmetic by comparison.

For these reasons, as Brockman195 indicates, the commonly held belief that the

traditional Chinese attitude towards contractual obligation resonates around

"the contract on the basis of some ill defined promise of good faith with later

191Pye L. Chinese Negotiating Style: Commercial Approaches and Cultural Principles. Quorum, 1992, p23. 192This response was demonstrated in the Shanghai experience in the century before 1949,

where "Shanghai's chaotic economy inspired strategies in business transactions designed to

cope with the uncertainty." - Lee TV, Risk y Business: Courts, Culture, and the

Marketplace, (1993) 47 University of Miami Law Review 1335 at 1345. 193Cf Parker RB. Law, Language and the Individual in Japan and the United States. (1988) 7

No1 Wisconsin International Law Journal 179 at 200. Parker states of the culturally similar

Japanese: "In a society of 'contextuals' for collectivists] . the wants and desires of the

people in the immediate situation are what is most important. The harmonization of those

wants and desires into a coherent pattern of interpersonal behaviour, which for

'contextuals' is constitutive of the self, is always the primary goal .... The formal surface of

human relations and the reality of real human beings in a real situation, indicates the

willingness of the Japanese to set aside general rules or principles (including law),

whenever the immediate needs and wants of the people in the immediate situation require

it... For the Japanese, both morality and law are concerned less with rule following and

more with people's attitudes." (pp200-201). 194Cf Blackman C, Negotiating China: Case Studies and Strategies, 1997, Allen and Unwin,

p71. 195Brockman RH, Commercial Contract Law in Late Nineteenth-Century Taiwan, in Essays

on China's Legal Tradition, Cohen JA, Edwards RR & Chen F-MC (eds), 1980, Princeton

University Press, p79.

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41

disputes to be settled on the basis of a mutual sense of natural justice" is a

superficial one.

Furthermore, as explained above, such theories do not account for the

formal and technical nature of the Chinese, and are inconsistent with the

intricate and penetrating role of the li and law in maintaining harmony and

the social order. For instance, as recent research reveals, self-enforcing

mechanisms were written into the contract which ensured protection for

both parties in the event of breach.196 In the same spirit, the Chinese today

"always arrive at carefully worded contracts", and as Pye reveals, "the

Chinese [are] quick to exploit legalisms if they [can] be turned to China's

advantage."197

However, whilst this recognition is important, we must ensure that we do

not make a Western dissection of Chinese contractual tradition. for the

differences extend to conceptualisation and perception.198 Stephens

articulates this concept well. He explains:

In Western thought, the antithesis of chaos is order, and order is

conceived of ... as an artificial objective deliberately brought about.

managed, and controlled in pre-determined forms according to the

conscious will of a transcendent power exterior to the flux, by the

enforcement of codes of rigid, universalistic, specific, imperatives

constraining conduct.

In Chinese thought and cultural tradition, the antithesis of chaos is

harmony, which is thought of as a natural characteristic of a state of

196The use of self- enforcing mechanisms seems to go as far back as the Han

Dynasty - see Scogin Jr HT, Between Heaven and Man: Contract and the State in Han

Dynasty China, (1990) 63 Southern California Law Review, 1325 at 1354-1355. This was

also done in Shanghai in the century prior to 1949 - Lee TV, Risk v Business: Courts,

Culture, and the Marketplace, (1993) 47 University of Miami Law Review 1335 at 1395 &

fn 265 of that article.

197Pye L. Chinese Negotiating Style: Commercial Approaches and Cultural Principles.

Quorum, 1992, p24. 198As Scogin argues, whilst there is an individualist or autonomous Western flavour

to the Chinese contractual tradition, in terms of the discretion of the contracting

parties, it is a superficial one, limited only to form. Scogin Jr HT, Between Heaven

and Man: Contract and the State in Han Dynasty China, (1990) 63 Southern California Law

Review, 1326. See, specifically 1334. Cf Parker RB, Law, Language and the Individual in

Japan and the United States, (1988) 7 No1 Wisconsin International Law Journal 179 at

200-201.

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42

affairs that arises and persists automatically in a hierarchical universe so

long as all the individual parts of the universe, even the smallest, and all

the persons in it, perform their duties and offices faithfully according to

internal necessities of their own natures i n whatever station or function

in life they find themselves born to or assigned to by superior

authority.199

Thus. the underlying structure of and attitudes towards contract requires

insightful contextualization "with the Chinese values and concepts from which

they sprang."200 Whilst the Chinese will rely on and even take advantage of

their contractual entitlements, they will do so from their own value sys tem and

conceptual framework. 201

7.4 The future role of traditional attitudes towards Sino - Western

contracts

As Hulsewe states, the occidental challenge to China "can only bring for th a

Chinese 'response '".202 Thus, an area of central importance to understanding

the motivations of other cultures and ourselves. yet seemingly insufficiently

acknowledged, if not perversley ignored, is the direct almost inextricable

connection of culture to law. As discussed, this particularly applies to China,

due to its Unifying philosophy. One could almost reverse engineer the

tendencies of a cultural system through dissecting a typical contract and the

attitudes associated with it. As Hall observes

In spite of the fact that cultural systems pattern behaviour in radically

different ways, they are deeply rooted in biology and physiology ... He

[/she] is distinguished from the other animals by virtue of the fact that

he [/she] has elaborated what I have termed extensions of his[/her]

organism. By developing his extensions, man[/woman] has been able to

199Stephens TB. Order and Discipline in China, 1992, University of Washington

Press, p4.

200Scogin Jr HT. Between Heaven and Man: Contract and the State in Han

Dynasty China, (1990) 63 Southern California Law Review, 1326 at 1334. 201Cf Parker RB, Law, Language and the Individual in Japan and the United

States. (1988) 7 No] Wisconsin International Law Journal 179 at 200. 202Ch'u T-T, Law and Society in Traditional China, 1965, Mouton & Co, p1.

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43

improve or specialise various functions.203

Contract is an extension of the Chinese cultural system.204

Therefore, as Hall warns:

Because of the interrelationship between man [and woman] and his

[and her] extensions, it behoves us to pay much more attention to

what kinds of extensions we create, not only for ourselves but for

others for whom they may be ill suited. 204

It is then alteration to Western would be beneficial in negotiation

social and legal climate in which the resultant contract has to operate. 206 As

Walters advises, in dealing with the culturally similar Japanese,

important to take heed of the extent to which a n legal and

contractual negotiation style streamlining the Sino-Western contractual

process, and in accounting for the Chinese political,

Understanding that cultural differences may create barriers and developing

ways to overcome them will do much toward success of the transaction.

Ignoring those differences a n d insisting on the terms of a written document

most often will broaden the gap.207

203Hall FT. The Hidden Dimension, 1987, Doubleday, p 3. 204The contract and the creation of it's legal notion per se, is, using Hall's

terminology, an extension, albeit a fairly complex one, in that it is an agreement

associated with socially and legally enforceable rules. Its "extension-like" nature is

furthered by the preference that it be in writing. Furthermore, it is culturally

constructed with the mental dynamics. such as the Chinese collect ivistic and high-

context communicative orientation, of the parties that are inextricably associated

with it. 205Hall ET, The Hidden Dimension, 1987, Doubleday, p177-8. 206It has been argued that this has been successfully done before by Sino-Western

parties, under arguably less conducive circumstances; in Shang hai in the century

prior to 1949. Lee TV, Risky Business: Courts, culture. and the Marketplace, (1993) 47

University of Miami Law Review 1335 at 1395. However, due to the political and

economic instability "all of the mechanisms ultimately depended on the strength of

the relationship involved." (p1395). 207Walters RJ. "Now that I Ate the Sushi, Do We Have a Deal" - The Lawyer as Negotiator

in Japanese - US Business Transactions, (1991) 12 North Western Journal of

International Law and Business 335 at 359.

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44

Furthermore, an appreciation of the Chinese cultural-philosophical tradition,

such as the Taoist approach to market forces in China's unique commercial

atmosphere, may suggest some helpful alternatives to Western negotiation

technique which would improve the quality and effectiveness of the Western

negotiation process.208

8. Conclusion

The Western negotiator cannot afford to ignore China's unique collectivistic

heritage consisting of its traditional tripartite approach to it's political, legal,

social and commercial environment, and its attempt to thread it through the

fabric of human action, manifested in the pivotal role of relationships. For, as

Scogin argues, the "evolution of these approaches in response the to the

interaction of economic change continues to the present day."209

Therefore. whilst, China's economic door is destined to open wider to the West

and the Chinese style of negotiation will change,210 the change will not be

208Cf Dellios R, How May the World Be at Peace?": Idealism as Realism in Chinese Strategic

Culture, in Hudson VM (ed), Culture and Foreign Policy, 199?. Lynne Rienner, p201- 230.

This work discusses the contribution Chinese strategic culture could make to achieving "a

less dysfunctional and conflictual international system than the one, based on Western

realism, we now have."(p201). It is tentatively submitted that this analysis could be

equated to improvements which could be made to the Western contractual negotiation

process. 209Scogin Jr HT, Between Heaven and Man: Contract and the State in Han Dynasty China,

(1990) 63 Southern California Law Review, 1326 at 1404. 210This will be strongly dictated by the "need for universalistic rationality in the emerging

market...". - King AY, Kuan-Hsi and Network Building, in The Meaning of Being Chinese,

Cohen ML (ed), 1994, Stanford University Press, p124: Cf Lee TV, Risky Business: Courts,

Culture, and the Marketplace, (1993 ) 47 University of Miami Law Review 1335 at 1409-

1412, which examines the Shanghai experience in the century prior to 1949 and the

positive effect of litigation on the commercial environment. However bear in mind that the

political climate was not communist and the enforcement of law was supported by direct

Western influence in terms of the Mixed Court. Though the study does present "evidence

that calls into question the proposition that anti-litigiousness is a timeless characteristic of

Chinese legal culture." And, it goes tentatively further to assert that "economics can

override culture to encourage litigiousness."(1411); However, Cf Pye L, Chinese

Negotiating Style: Commercial Approaches and Cultural Principles,

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45

fundamental. As Bond perceptively states, "[t]o confuse modernisation with

Westernisation is to confuse process with origin."211 The oldest civilization on

earth cannot abdicate aspects of its cultural system overnight. 212 Nor, more

importantly, would it want to.213 It believes in it's system214 and, to an extent,

the superiority of its culture.215 Furthermore, the ancient strategies

Quorum, 1992, p55, whose research indicated that most Western businessmen believed the

Chinese were no longer going through a "learning process", resulting in more legalistic

procedures. 211Bond MH, Beyond the Chinese Face - Insights from Psychology, 1991, Oxford University

Press, p112. As Yang Kuo-Shu observes of the Japanese experience "Strong traditional

values such as group solidarity, interpersonal harmony, paternalism, and familism are

coexisting with quite modern values such as achievement and competition, and ... along

with democratic values exist beliefs in hierarchical social structures and in authority,

obedience, and inequality of men and women."(quoted in Bond p114). 212A s Hall states "no matter how hard man [/woman] tries it is impossible for him [/her]

to divest himself [/herself] of his [/her] own culture, for it has penetrated to the roots of

his [/her] nervous system and determines how he [/she] perceives the world. Most of

culture lies hidden outside voluntary control, making up the warp and weft of human

existence. Even "when small fragments of culture are elevated to awareness, they are

difficult to change, not only because they are so personally experienced but because people

cannot act or interact at all in any meaningful way except through the medium of culture."

- Hall ET, The Hidden Dimension, 1987, Doubleday, p 177. 213A s Tay and Leung state the traditions "are most likely to survive even among the very

modern Chinese when there is advantage to the Chinese side in staying with the old ways."

- Tay A E-S & Leung CSC, The Relation Between Culture, Commerce and Ethics, in Tay AE-

S & Leung CSC (eds), Greater China: Law, Society and Trade, 1997, LBC, p6. As a

comprehensive survey indicates, kuan-Hsi (personal relationship) is seen as essential to

the Chinese in social-economic life. More, surprisingly younger people are seeming to place

greater importance to kuan-Hsi than older people - Chu G & Yanan J, The Great Wall in

Ruins: Cultural Change in China, 1990, East-West Centre - where they drew a stratified

probability sample of 2000 respondents. including 1,199 from metropolitan Shanghai, 304

from two towns in Qinpu (a rural county outside Shanghai), and 497 from twenty villages

in four of the twenty rural districts. The intention of the findings is to give us an overall

view of what contemporary Chinese culture looks like. 214There is considerable evidence that despite the ongoing erection of the commercial

legal framework, the Chinese at large are unconvinced by the legal principles and

processes that these laws enshrine Zweig D, Hartford K, Feinerman J and Deng J, Law,

Contracts, and Economic Modernization: Lessons From the Recent Chinese Rural Reforms,

(1987) 23 no 2 Stanford Journal of International Law 319-364. 215This is widely acknowledged. Bond states that the Chinese " show great concern about

the potential loss of their Chineseness, but believe they can modernize without

Westernizing. They consider it possible to industrialize, to embrace democratic institutions,

and to fraternize with those outside their own culture without compromising their strong

family traditions, their self-restraint, and their cultural pride." -Bond MH, Beyond the

Chinese Face - Insights from Psychology, 1991, Oxford University Press,p166. See further

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46

inextricably associated216 with it work at the Sino-Western negotiation table.217

In addition, the alternative collectivist and high-context psychological make-up

will prevent any convincing adoption of the Western method of negotiation, for

the Chinese negotiation process does not just reflect a unique style, but a way

of being.

Thus, the influence of Chinese culture and tradition in Sino-Western

negotiation will not disappear, but it will, characteristically, continue to evolve,

dynamically responding in true Taoist fashion to Western market demands.

Whilst the face of Chinese negotiation is likely to Westernise, its fundamental

structure will not. Rather, it will adapt to the bi-cultural environment.

becoming less physically apparent, yet retaining its role of directing the

Chinese negotiators perceptions, and strategy. Whilst this cultural camouflage

may make the role of the cultural system and the influence of heritage more

subtle, it will also make it more sophisticated. This will only make the Western

negotiators' need for cross-cultural awareness more acute and urgent.

As Fisher and Brown of the Harvard Negotiation Team believe, 218 it only takes

one participant to change a relationship. If we alter the way we react to

others, they will alter the way they react to us. The objective of change is

developing "a relationship that can deal with differences."219 Dealing with

cultural differences becomes a formidable task in the Sino-Western context.

Pye L, Chinese Negotiating Style: Commercial Approaches and Cultural Principles, Quorum,

1992, p94; and, Cf Tay A E-S & Leung CSC. The Relation Between Culture, Commerce and

Ethics, in Tay AES & Leung CSC (eds), Greater China: Law, Society and Trade, 1997, LBC,

p8. 216eg Chu C-N, The Asian Mind Game, 1995, Stealth, p15 & 19. 217For example. "(1) A tendency to disesteem heroism and violence, not glorify it.

and to prefer non violent means in overcoming others achieving one's aims; ...

(2) A tradition of land warfare that prefers defense to offense and stresses the

exhausting of an attacker or the pacification of a rebel as less costly than their

extermination...." Such strategies produce very effective negotiators. Fairbank JK,

Varieties of the Chinese Military Experience, introduction in Chinese Ways in Warfare,

Kierman Jr FA & Fairbank JK (eds.), 1974, Harvard University Press, p25-6. 218Fisher R & Brown S, Getting Together: Building Relationships as we Negotiate,

1988, Houghton Mifflin. 219Fisher R & Brown S, Getting Together: Building Relationships as we Negotiate,

1988, Houghton Mifflin, p3.

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47

It is a three step process which entails identifying the differences; being

dynamically aware moment to moment during the negotiation process in order

to isolate the differences as they arise; and lastly, being capable of altering our

response so as to work with and around the difference and even benefit220 from

it rather than clash with it. Whilst this skill is not acquired overnight, it is

achievable. Moreover, the proof is in the pudding - the integration of it into the

negotiator’s repertoire will be validated by the results.

220Such as pre-empting a particular culturally motivated strategy.

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