Many Chinese people are embarrassed by compliments, and when complimented, they quickly deflect it by playing it down. This is part of the modesty that governs Chinese social behavior and makes Chinese people appear much more humble than most Westerners.
For example, I saw an acquaintance one day and complimented her on her great new haircut and outfit. Instead of saying "thank you" she immediately replied, "No, I don't look nearly as young and pretty as you do." At first I thought that that was a strange way to answer a compliment. But later I began to see that kind of exchange among almost all Chinese women and I began to understand why. It was a way to show their embarrassment and to give a compliment back to their friend.
Many Chinese people are acutely aware of the differences between how Westerners and Chinese receive compliments. In fact, it is somewhat of a joke now how Bryan and I react to compliments paid to us by Chinese friends. While writing this book, the Vice Director General from the State Council Information Office met with Bryan and me to inquire about the progress of the writing. Upon meeting me, she said to Bryan, "Your wife is quite beautiful." He answered, "Thank you" in Chinese. She commented "That was quite an American answer." "The Chinese" she added, "would say 'Na li, na Ii '" which literally translates to "Where, where?" but really means "No, not really."
(selected from 101 Stories for Foreigners to Understand Chinese People by Yi S. Ellis and Bryan D. Ellis, published by China Intercontinental Press in 2012)