Negotiating with the Chinese is rarely like it is in Western cultures. Relationships, the concept of "saving face", and the need to spell out every little detail and expectation -- not just contractually, but operationally as well -- is absolutely critical. I like what The China Sourcing Blog has to say on the subject. According to a recent post, "effective negotiation in China can only operate within China's cultural context to seek a positive outcome for both sides … in China, the applicable saying is ???? (ru xiang sui su*) … Hence negotiation in China is rarely straightforward, like with the complex importance attached to building trust and the finer nuances of participating in banquets, dinners, visits and even karaoke. These, as David Dayton writes at Silk Road International, are all planned and scripted with clearly defined roles, where foreign buyers are required to play their part in the Chinese script, whether they speak Chinese or not. Of the various ploys and stratagems he experienced in conducting negotiations in China, Dayton deems organization, detail, politeness, a strong will and a healthy dose of patience as the most important."
To this I would reiterate the need to spell out your specific expectations with the Chinese at every step of the way. Don't assume anything. One anecdote I absolutely love comes from a gentleman I met last year who at one time had sourced finished products (drills) from China. He remarked that when one shipment arrived with a damaged finish on each drill (the red paint was chipping in the production process and rust was starting to show on the products by the time they arrived) that the Chinese supplier offered to have the chips painted and touched up in China before they hit the water. What he did not say is that they would touch them up with a different color paint (grey) than the drills themselves. When confronted with this after the next container arrived, the supplier chastised the buyer for not saying: "you should have said use red paint to cover up the chips." You'd think this would go without saying, but alas, it was never spelled out.
"* When entering the village, follow the local custom"
- Jason Busch