Different industries have varying margins in China, and even within the same industry, some suppliers quote high, some quote low. So, there is no set formula for negotiation such as "If they say 100, I say 50 and we split the difference."

In the US, for example, we tend to think of negotiations as a sport with a 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. There is no fixed time when the negotiation takes place or ends. In short, there are a whole set of negotiation tactics which are beyond the scope of this article and certainly outside of the skill set of the average foreign buyer, including myself.

I like to joke that Chinese people have been negotiating with each other for 5,000 years of continuous history and it is not like I am going to walk in the room and outnegotiate them.

But even if I cannot, I still have the ability to outresearch them. And this brings us to the most important weapon in your supplier negotiation arsenal: research.

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 ABC company. I am impressed with the quality systems and the strong reputation your company has. However, my coworkers 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 XYZ location, and their price is 8 percent lower than yours. We would prefer to do business with ABC if you can match the offer from XYZ.

It basically comes down to a diplomatically delivered "take it or leave it." If my research about the options is accurate, that supplier XYZ for example offers 8 percent lower prices, then ABC company will be aware that I know what it knows. In this case, what the going price is for a given product in China. Because of this ABC will more than likely come down in price.

But, never try to bluff or make up a fictitious second maker with prices made up out of thin air. Suppliers have a very good sense of the going price in China and they may even know most of their competition very well. If supplier ABC senses you do not really know the going price for a particular product, you will find it hard to negotiate effectively.