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Negotiating With Chinese Companies More Powerful Than You

Posted in China Business

Just read this Harvard Business Review article on “How to Negotiate with Someone More Powerful than You” and could not help but be reminded of almost every Chinese negotiation in which I have been involved. Scratch that. Every Chinese negotiation in which I’ve been involved.

When foreigners come to do business in China, it is easy to forget how unbalanced the power is at the negotiating table. We’re in their house and things are complicated and weird. However, the Chinese enjoy, and are quite good at making us want to check our brain at the door.  For more on this, check out Doing Business With China. The Ten Keys and Take Your Brain With You, Or How NOT to Handle Your Chinese Legal Matters.

Though the HBR article did not address China, the following points (with my liberal additions) are particularly useful as a guide for working in China

  • Buck yourself up. If the jet lag, food, smells or lack of English are causing you some apprehension or making you feel a bit less sharp than usual, take time to focus on why you are here, and get psyched up for the day.
  • Understand your goals and theirs. Research what the Chinese side actually wants from its potential deal with you. You can be certain that the Chinese party will mask at least some of their underlying goals and negotiate from their strong position of home field advantage. Use some Art of War “position awareness” tactics yourself. Often, you should disregard a lot of what they are saying, and if you can know where things are really heading, it will let you form your own strategy and safeguards to help ensure you get what you want.
  • Prepare, prepare, prepare. Preparing in the right areas is key here. You know your business better than anyone, and you likely have thought through many of the important details you want in the deal. My law firm constantly gets contacted by American companies who want us to confirm their worst suspicions about their China deal partners after the contract has been signed or the money has been paid. I should not have to tell you but the time to conduct due diligence and an FCPA  compliance check on your China partner is before you sign, not after.
  • Listen and ask questions. I love how the article points out that “If they can’t defend it, you’ve shifted the power a bit.” This is what direct questions do in weeding out poor quality Chinese partners. If you get unspecific and/or evasive answers (like the classic phrases “No problem” or “Don’t worry about it”) you know something is up.  There is always a chance you are dealing with an underling who does not actually know the answer to something, so be careful in your assumptions. But, if you ask about the person listed as the Chinese company’s Legal Representative or what the name of the company will be on the contract (or who owns it), and no one knows or is willing to tell you – you do have a problem.
  • Keep your cool. The Chinese are expert at playing to a foreigner’s ego. You are not a great karaoke singer nor is your Chinese that good and if you are getting compliments for this sort of thing, you should realize that it is because the Chinese company wants something from you. Remember that you are there to make a good deal, not to prove how adept you are with foreign travel.

Does this match with your China negotiation experiences?

For more on negotiating with Chinese companies, check out the following:

Editor’s Note.This post was written by Arlo Kipfer, who recently joined our law firm as a paralegal. Arlo is fluent in Chinese and has been helping foreign businesses in China for the last decade, with particular expertise in bringing foreign-owned entities into compliance with Chinese law and policy. He has managed regional sourcing offices for publicly traded companies, conducted supply chain review and realignment, and negotiated with a wide range of local, regional and provincial officials. Arlo will be splitting his time between Shenzhen and Shanghai and, as a key part of our China compliance team, will be assisting clients with negotiations, factory due diligence, employee training, and other compliance matters.

  • Lucas Blaustein

    “Know thy enemy and know thyself and you can predict the outcome of a hundred battles.”

    In 1962 when Chairman Mao was lecturing his generals on the border skirmish with India he cited a military encounter from the Tang Dynasty around 1,300 years ago. His purpose was to provide an example of how to effectively force India’s complacence. Each of his generals knew the encounter and recognized the parallels. History easily reflects the outcome of that conflict… resounding Chinese victory.

    The Chinese are students of history and masters of their civilization – this is their greatest asset and their most exploitable weakness. If you are going to negotiate in China know your Sunzi.