A Simple Way to Negotiate Price
If you are looking for advice or guide on negotiating price in China, in this blog post, I will share with you a simple way to negotiate price with the Chinese suppliers.
Different industries have different margins, and even within the same industry, some suppliers quote high, some quote low. So, I am sorry to say there is no set formula for negotiation of the price in China. It’s not like “if they say 100, I say 50 and we split the difference”.
In the USA for example, we tend to think of negotiations as a sport with set of rules and protocol. Two gladiators sit at the negotiation table and the one with the supplier negotiation ninjitsu is going to get the better price.
But in China the rules of negotiation are totally different and there are a whole set of Chinese negotiation tactics which are beyond the scope of this introductory mini course.
As my Chinese father-in-law likes to remind me, the Chinese have been negotiating with each other for 1000 of years of continuous history and it is not like I’m going to walk in the room and out negotiate them.
He’s right, but even if I can’t beat them at their own negotiation game, I still have the ability to out-research them. And this brings us to the most important weapon in your supplier negotiation arsenal: “research”.
Typical Path to Negotiate Price in China
Most of my negotiations take only a few minutes, but my research may have taken months. My typical negotiation goes like this:
Mr. Li, it has been a pleasure to get to know you and your company. I am impressed with the quality systems and the strong reputation your firm has. However, my co-workers on the sourcing team are required to get multiple quotations from multiple suppliers. My staff has found a factory of similar size to yours with similar quality and lead-times in the next province over, and their price is 8% lower than yours. We would prefer to do business with you if you can match the offer from the other supplier.
It basically comes down to a diplomatically delivered “take it or leave it”. If my research is accurate about the going rates, then Mr. Li will know that I know what he knows, and Mr. Li will more than likely come down in price.
However, because suppliers have a very good sense of the going price of a given product in China, and they may even personally know the boss of the other factories where you got your quote, never try to bluff or make up a fictitious 2nd supplier with prices made up out of thin air. If Mr. Li senses you don’t really know the going price for a product in China, and you will find it very hard to negotiate effectively.
ABL Blog: Sr. Editor and Primary Content Creator: Michael J. Bellamy
Originally from Upstate New York, Mike moved to Asia in 1993 and is a China business advisor to both Fortune 500 companies and small businesses. Recognized as an expert on doing business in China, he has been interviewed by WSJ, CNBC, FT & Bloomberg.
A featured presenter on China issues at seminars, trade shows and corporate events across the globe.
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