Will your negotiation skills back home equip you for negotiating in China? Well they're important, but they're not quite enough. You'll also need a good grasp of the cultural differences or you'll be mystified by unexpected responses and they'll run circles colse to you. So here are a few key theory for negotiating in the land of the dragon.
1. Be Objective
Western Hard Drive
Many stories about China are exaggerated, one way or the other. We've heard of extraordinary deals, providing goods and services at a fraction of local costs. We've heard of toxic Chinese products and enterprise tycoons who will cheat you at the drop of a hat. But China is neither black nor white, and a thriving enterprise man needs to strip away the political agendas that get in the way of sound enterprise decisions.
We should also be wary of snap judgments by habitancy who bail out impatiently with accusations of rampant deception and contracts never honoured. As a matter of fact we should heed all warnings of danger, and be enduringly on our guard. But we must seek a realistic view, neither wearing rose-coloured glasses nor seeing treachery in every misunderstanding.
It's prominent to be realistic with regard to issues of honesty. As in any country, there is no shortage of scoundrels in China. Neither is there a shortage of good and respectable citizens at all levels striving to meet high standards. Nothing unusual about that. But cultural differences make it easy to misinterpret strategic manoeuvres on their part. We may see it as outright deception when - in their own view of allowable behaviour - they are acting honourably but cleverly. And they may see our own clever manoeuvres as questionable behaviour within their ethical system. The point is not to judge each other and kill the deal, but to find that tasteless ground which produces a good compact for both parties. That requires us to find a delicate balance in the middle of giving our opponents the advantage of the doubt when we fail to fathom the purpose of their actions, and avoiding the risk that man will take advantage of our trust.
We need to be true about old advice. Any economy, in the years before it gets properly regulated, has a lot of leeway, and fullness of opportunities for unscrupulous dealers to rip you off. So consultants used to give sound advice to clients - Watch out for treachery and dishonesty. Serious caution is still good advice, but times are changing at an extraordinary pace. The Chinese have aspirations of becoming world economic leaders, and they fully recognize the need for spoton professionalism and integrity to meet their goals. It's not much of a stretch, since there's no lack of pro pride in Chinese history. You'll find that your major cautionary task in this century, apart from normal vigilance, is to recognize the modern high-quality firms and cut off them from the rogue elements. At the same time, the Chinese cheaper is still in flux, and there are still adequate bandits out there to warrant serious caution.
2. Ease In Carefully
Think you can leap in, sign a great deal, and Move on? Not likely. You need to get the feel of negotiating in China. You have to get to know your partners, to rule who can be trusted and where you need to be careful. You need to make your first mistakes on low-value and low-priority deals. This can be good advice in any case, but it's especially prominent if you don't have much touch in the treacherous waters of inter-cultural negotiations. Try out a join of low-risk transactions before plunging into the deep end.
You need to rein in your western tendency to jump in, cut to the chase, and score a deal cleanly and quickly. The Chinese don't quite work that way. Nonetheless, they've learned how to deal with we cowboys with money to burn, barging in to do serious enterprise on the spot. We'll get the runaround, as befitting man who isn't serious adequate to design a trusting association first. In their view - some barbarian who won't take the time to build relationships deserves to be outfoxed.
At the same time, this isn't Universally the case. If you're dealing in Beijing or Shanghai or any other very advanced centre, they're more familiar with western styles of business. In fact, they're quite sophisticated. They're a little more willing to play the game your way, and make some compromises to western impatience in order to Move the process along efficiently. In the less advanced regions, they're often a little more steeped in traditional Chinese ways. But they both know how to deal with your eagerness and get what they want. In whether case, learn the culture first, and take your time.
3. Work with the Right People
Here's where a good knowledge of Chinese association structures is important. Positive habitancy are authorized to make a deal, while others are only intermediaries - and you may not find them in familiar positions. In your first set of meetings, maybe even for a long time, you may be dealing only with the intermediaries. They won't tell you that at the start, and you'll be frustrated when you find out that nobody has the authority to cut a deal. This may be offensive in the west, but it's allowable protocol in the east. You'll probably be escorted to some meetings and banquets, and the key officials will be present at some of them, but you won't As a matter of fact know who's who until late in the game. This is where you need your gentle skills, to show your respect for Chinese traditional ways at the same time as you badger them to get the allowable authorities at the table.
Actually, the intermediaries do have significant importance. They're there to do the grunt work of seeing out what's possible, and to iron out the introductory proposals, so that their superiors need only deal with the final decisions. So treat them with respect, or you'll never get to see the key players. At the same time, be true to rule if they As a matter of fact are properly associated to do the job. You may end up with some peripheral agent - who cites great touch in dealing with western business, but who As a matter of fact has little stature - because they want to feel you out before they have to deal with you directly. Beware if they send you a westerner who is As a matter of fact little more than an English educator with grand aspirations. They don't trust him any more than you do, but he'll keep you at bay until they're ready to Move.
Check references, making sure they're all in the same industry. Make the call to confirm. Be a detective, with an analyst if necessary. Ask about track record. Did they meet deadlines? Did they understand the meaning of a completed job? In any environment of economic development, expect incompetence to be common, and hunt for the competent ones. Incompetence and inexperience are just as much problem as dishonesty. Avoid firms dealing with westerners for the first time - they'll be out to design their cleverness by taking you for a ride. Your best bet is a western-invested enterprise with western executives at the top levels. Check out everything.
4. Seek Clarity
A good western negotiator, with any sense of strategy, will not offer his opponent a clear photo of his ultimate goals or what compromises he will accept. Chinese intermediaries have an even greater incentive to disguise their exact objectives and, in fact, to keep shifting them as the negotiation proceeds. They don't feel obligated to bind to their proposals from session to session, since they're not the deciders. They don't think it's beneficial for whether party if they stick rigidly to some "deal" they made with you yesterday. That would be viewed as irresponsible, since only the higher authority is entitled to make final decisions. They don't delegate authority as easily as we do. Don't expect to sign off some clause and then move on to the next, fetch that the clause has been finalized, as you would back home. It doesn't work that way. Intermediate deals are flexible, and can be sacrificed unilaterally in the end game. Since all is tentative until the final act, they may be quite evasive in the early stages. Or they may overstate a verbal trade due to difficulties in understanding our language and our culture. So during these intermediate stages, you may have to fight tooth and nail for clarity.
But don't just treat it as fighting the culture, or trying to educate them in the easy ways of the west. The Chinese are indirect and group-oriented in ways that serve them well, even in business. They are rooted in a pre-market family-oriented culture, in which social harmony is maintained straight through a gentle style of transportation - where individuals are not assaulted too directly with brutal facts. It's a transportation style that comes into sharp friction with our blunt and unfeeling western directness. The Chinese view their transportation style as the essence of civilization, as Positive from us barbarians, and they will not abandon it easily. So don't just dismiss them - "The Chinese don't do clarity". Learn the language of indirect communication, and you will elicit much greater cooperation in seeing what you need to know. Learn the trick of assertive indirectness.
5. trade Strategically
To begin with, get control of the agenda. They may use their position as host to load you down with meetings and banquets, especially if they are old school - though in the modern centres they're more inclined to get level down to business. Still, if you're spending the money, you're in Charge. rule if the meeting or banquet is important, if the officials you're meeting are As a matter of fact relevant to the discussion, or whether they are just window dressing to show off their connections and keep you tied to their agenda. You have to find a balance in the middle of receiving their hospitality graciously and getting down to business. Extensive it's a gentle Power struggle right from the start, and you need to make it clear you want to negotiate the agenda. At the same time, remember that they want to deal with you and keep you away from their competitors, so leave the exit door open a little in case they're too inflexible. If you come in wide-eyed about making a China deal, you'll end up playing their game. Have a Plan B - an alternate source of Supply will boost your reliance enormously.
Many western advisors will tell you to expect deception in China, but it's often just a distinct vision of what's legitimate and honourable in the contentious arena. It's only deception if the other party expects something different. That doesn't help you much. If you don't know the culture well, it's going to be deceptive in your eyes. So it's safer to result the rule: expect deception. But don't express disrespect unless you catch them blatantly cHeating or lying - and give them the advantage of the moral doubt if they're just backtracking because they got into trouble. It's a delicate game. Protect yourself without being offensive.
It's prominent not to automatically accept any claims at face value, without good reason. Are they As a matter of fact an old established enterprise with a wholesome store valuation, a strong store share, exclusive ownership and patents, all the allowable certifications, and fullness of orders from Europe? best check these things out, since their definitions may be distinct from yours. Is the new plant they're making ready to build As a matter of fact going to bring dramatic improvement in ability and costs? You're putting up the money, so you should be allowed to see the books, though sometimes their claims of inadequate bookkeeping may be valid. You may need help here, since legitimate Chinese accounting practices are distinct from ours, and in some ways hard to fathom. And finally, don't accept the claim that they have the suited connections that will make all work out just fine in the end, because you have no way whatsoever of checking that out. maybe at this point they will throw the trust consulation at you, claiming that your doubts are undermining a valued relationship. Don't fall for it.
If you're not picky, you'll leave holes they can drive a truck through. "Best effort" sales agreements are not enough. Get the details on their marketing network. Cash in improve is dangerous, no matter how much they throw the trust consulation at you. present it as a spoton matter of policy, and point out safer payment vehicles which are easily available. If they can't get a bank to cooperate on a letter of credit, run for the hills. If you're a buyer, insist on a test order. They will talk about not doing test orders because they're construction long-term relationships, but don't buy that argument. Chinese firms will do test orders when pressed. Look behind the facade to see if there's real brick and mortar and infrastructure in place. And remember that, if a firm is not very cooperative before the money has been transferred, they'll probably be even less cooperative afterwards. So get all you can firmed up in advance, even if it threatens to sour the deal. The politeness and respect that you demonstrated from the beginning of the process will serve you well when you have to hold the line at the end.
Even when you reach an agreement, you'll find that many more things than you opinion were unclear, or interpreted differently. Be ready to renegotiate often, and get their trade on a renegotiation process before you sign.
6. Learn the Price Game
In a country where they trade for apples on the street, they're not shy about bargaining, and they trade hard. Don't be put off by an outrageous introductory price. It's all part of the game. whether or not they move to a inexpensive price in short order is a clear indication of whether or not they're ready to trade seriously. Let the occasion moves play out. With apples on the street, some will overCharge a foreigner just on principle, as well as to defend their national pride and to save face. So keep a clear eye on your own range of suitable prices, and stick to it rigorously.
If you're putting up the money, don't let them talk you into quoting the first price. The first move should be theirs, though exceptions may be allowed if you already have a good association with them straight through past dealings. present it as your firm's policy, and refer to allowable procedures. It's a game of gentle assertiveness, and this may be the occasion Power struggle. Insist they Supply figures to back up their price, and eventually rule for just a first price offer. But keep up the question for backup data as the price consulation progresses. Don't let them win this occasion round, or they'll have the upper hand.
Be ready to deal with an outrageous price, which will be especially outrageous if they've lost the battle over the first offer. Match an outrageous price with a fairly-outrageous counter, because they may only inch their way down and you need room to manoeuvre. Be ready to walk if their moves are only tokens. Do your homework, and know the market, so that you can confidently hold the line until they bring it into the ballpark. Then the real bargaining begins.
Don't accept a high price on a promise that they'll lower the price in the near future,
"when we get the new technology online",
"when we move to the new facility",
"when we design the new product",
"when we hire the new engineer",
"when we get approval from the government',
"when we cease the merger".
Maybe they're sincere. But maybe they're wishful thinking. Hold out for the price you need. Cut them off quickly. "Not a chance. We don't do speculation. We need to work with real prices right off the bat."
And you may have to leave your fancy supervision theory behind. It's quite fashionable in the west to seek win-win solutions. But China's a developing country, not long out of poverty, in a brutal marketplace. They're quite accustomed to win-lose, and they're quite happy to win. But again, you'll find them somewhat more refined in the major centres.
7. Pay attentiveness to the Non-price Issues
Many traders will tell you that Chinese are motivated by price alone. They will attach little significance to issues of ability or delivery or service, assuming these are secondary issues that can be put aside. That view of Chinese negotiators is man outdated. A narrow price orientation is not as prevalent as it used to be, but you will still run into it often enough, and you may need to insist that the price is contingent on the whole package. Insist that the price trade will be void if Positive conditions are not met. Price cannot be negotiated in isolation. Some may try to brush that off, figuring that you won't push it. Push it. Be picky. Insist on engineering specs on the beneficial life of the product. Have them justify their ability control procedures, and their warrantee policy. Get a spoton definition of how satisfactory carrying out is specified, and what constitutes a completed project.
8. Understand Networking and Contracts
This is a tough one. Networking isn't the same in China. It's a much deeper and more complex phenomenon, with implications that we westerners cannot As a matter of fact fathom. The potential for misunderstanding is enormous.
It can be simplified a little. Think again of a pre-market society. How would a pre-market community design themselves without advantage of the marketplace? They design themselves into trusted circles of house and friends, and they exchange favours. The rules are spoton - if man offers you a favour, you owe an equal favour in return. These circles overlap and interconnect into complex networks. Over time some of these circles become more prominent than others, and if you find yourself associated into an prominent circle, you have "connections". The Chinese call it "guanxi" (pronounced gwan-shee), and there are two main rules as far as you're concerned. One, any favour or gift is a debt which must be repaid in full measure, or more if the giver belongs to a more prominent circle. And two, habitancy with the right guanxi can achieve whatever for you, but it won't be free. And it's not guaranteed. Do him a favour and he will owe you something. But don't count on him to spend his guanxi capital to repay you.
Connected with that is an attitude toward contracts. The guanxi circle is a association of trust among colleagues. To overstate the consulation a little - it's a western aberration to question that all relationships be reduced to an impersonal rats-nest of contracts, as if no one can be trusted. For civilized people, your word is your bond. While in the modern Chinese enterprise centres they've come to appreciate the value of a contract, and will even get underway it, there are still some who will try to convince you to make a commitment (and exchange your money) without one. They may play the trust card, so know how to deal with it.
Recognize that a westerner like you will never become a full member of any Chinese guanxi circle. You will always be an outsider, and a second-class citizen, with no ownership and no recourse. "My guanxi is your guanxi - don't worry, I can get it for you" is not in the sLightest degree a commitment you can take to the bank. You need it explicitly detailed in black and white, no matter how much that may brand you as a western barbarian. But I railroad to repeat that, the more progressive Chinese managers are on the same page as you and I, fully appreciating the need for a water-tight contract. Those are the ones you should look for. But if you're in a more traditional centre, you may have to fight for it.
9. Understand Indirectness and Face
China is a association based society, advanced long before the store turned our European ancestors into disjointed individuals contentious with each other in the marketplace. Again to overstate for the sake of consulation - we have no need for relationships. store contracts regulate our lives and how we interact with each other. But for the Chinese, relationships are everything.
So how have the Chinese kept it all functioning smoothly? We have civil order based on a theory of compact law to keep us in line. How have they kept habitancy in line for thousands of years without that? They have established a mature and stable hierarchy of status relationships, and they say Positive spoton norms of behaviour. Chief surrounded by these behavioral norms, significant for maintaining order in a relationship-based society, are the following two. First, never provoke a confrontation by issuing direct challenges to others - which results in the preeminent Chinese indirectness. Second, never undermine someone's status in community by causing them to lose face. Understand how these rules lies at the root of the Chinese psyche, if you want to understand their reaction to our western brutishness.
So don't wonder why sometimes they seem to be running colse to in circles, and never seeming to get to the point. Bluntness is insensitive and uncivilized. A way must be found to press the point gently. You're just not understanding the language of indirectness. And don't wonder why they seem so implicated about losing face. Humiliating others is insensitive and uncivilized. As a matter of fact they are insensitive and uncivilized, when you come to think of it. In the midst of a frustrating negotiation session, take a occasion to look at it from their point of view. Then look for a way out of the impasse which will not put them on the defensive, and which will grant them face. In fact, face-giving is the key to success. Find ways to make them happy, and they'll make you happy.
10. Play the Game, but Cleanly
China has a sophisticated set of laws. She's come into the store only recently, but she's done a suited job of setting up a legal framework for manufactures in such a short time. However, there's a Chinese way of doing everything, reflected in those laws and regulations, and you would do well to learn to play the game. At the same time, China still has a long way to go, and not all is fully covered by laws and procedures. There's a lot of leeway everywhere, in the gap in the middle of the socialist regulation of community and the law of the market.
Corruption ranges from black to shades of grey. There are many kinds of activities which anyone, east or west, would call corruption. And China's come a long way in routing out real corruption in the major centres. At the same time, there are many activities which fall into a grey area - they're not strictly illegal but not quite legitimate. Or the paperwork is lax, and nobody As a matter of fact knows what's going on. How do we deal with those?
It's often not so simple. The guanxi theory runs by distinct rules, and it may be unclear what's legitimate and what's not - in their terms. What do we do when something is perfectly legitimate and honourable in Chinese eyes, but outright corruption in ours? After all, exchanging money for varied considerations among in-groups is the essence of sound association economics, but we tend to view it in a store context as unethical. Do we call it corruption? Here's where we have to find a balance. Don't insult your adversaries by denouncing every favour that facilitates a transaction. But don't agree to whatever illegal or clearly unethical. You'll have lot's of company. In modern Chinese society, there is a strong sentiment for rooting out corruption.
It's hard to know the prevalence of corruption. The government is probably spoton to say that their anti-corruption campaigns have been effective, and there's a significant mass of influential habitancy who pride themselves on clean practice. In that view, Extensive corruption is old news, and you may well get caught. But there are also habitancy in many places who still credibly claim they can't do a day's enterprise without passing the red envelope under the table, and you just have to play along if you want to get anywhere.
So you'll have to play it by ear. Your normal stance should be that you refuse to pay bribes. You run a clean ship with a clear set of transparent practices, and you want to keep it that way. At the same time, you may feel some need to look the other way when discretion dictates. But if you find yourself in a situation where bribes and kickbacks are the only game in town, you'll have to make your own decision whether to hold your nose or bail out.
11. Do Your Due Diligence
Any cheaper like China, rapidly pulling out of underdevelopment, is going to be a contradiction containing many advanced firms with high standards alongside a significant still-backwards sector. So your traditional due-diligence task is to sort them out. If you deal with a firm which is still trying to remain back in the lawless days, not only will you be propping up regressive forces, but you'll get ripped off. And you may get in problem with the authorities. In up-to-date years, Chinese authorities have been pretty effective in using enhanced enforcement and pro peer pressure to shift the centre of gravity toward ethical practices in the major centres. If you're working in the less advanced areas, you'd best be on your guard.
In whether case, you need to check their references rigorously. Conditions vary in China, and that dictates process. As a still-developing country, you can still expect to find many firms functioning at low levels with low standards. The days of poor quality, deadlines not honoured, work not finished, inappropriate substitutions, financial rip-offs, etc. Are still alive in some quarters. It's true adequate that the preeminent Chinese national pride is impelling them to design higher standards and join the world community of top-level professionalism. So don't underestimate them, or the rapidity of their progress. Just don't get caught with a dud.
Of procedure there is the matter of the language and culture gap, which is why you need to work with knowledgeable consultants. But these consultants themselves will vary in quality, so there's the first item for spoton reference checking. Who have they worked for? touch past clients and ask how satisfied they've been. These are probably habitancy who speak English, so you can easily get a beneficial reference. Stick to pro references, not just friends and colleagues, and look for a track report of thriving international deals.
When checking out Chinese firms, specialize in naive questions and keep asking until you're satisfied. Don't let them deflect you with embarrassment. There's no such thing as a brainless question, and there's no shame in questioning repeatedly until you understand. Persistence may be effective in breaking straight through a runaround, and it's helpful if you know how to use indirect language in a passive-aggressive manner. But you'll do best when you can deal with the higher-quality firms that will be level with you and won't give you the runaround in the first place.
Got this all down? Done your homework? You're ready to meet. Good luck.
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