Negotiating with Chinese companiesJust read a great post over at Andrew Hupert’s ChinaSolved Blog, entitled, Lessons from the G20 for “Regular” Negotiators. Hupert, who I count among the foremost experts at negotiating with Chinese companies, uses China’s recent dissing of President Obama as the springboard for explaining how foreign companies should negotiate with Chinese companies.

Hupert starts out his post by saying that no matter how seriously you view China’s treatment of the American entourage, it was “real” and mitigating or glossing over a conflict as “unimportant” is counter-productive and dangerous. “This was a significant event, and if you are negotiating with a Chinese counter-party then you need a plan for dealing with similar encounters.”

I completely agree with Hupert’s point and I have to say that our China lawyers too often encounter minimizing or tortured explanations of Chinese behavior from our clients. Chinese company didn’t pay on time? Must be because it didn’t understand the contract? Chinese company said it would do X and then did the exact opposite? Must be because of Chinese cultural differences. We hear these sorts of explanations all the time and our response to them is always something along the following lines: these are smart people who know exactly what they are doing. They are testing you and if you let them get away with it this time, you will be opening up the door to future incidents.

Or as Hupert so aptly puts it:

Ignoring them or pretending that they are immaterial to your business is a major blunder. Your negotiating counter-party is a serious person with experience, values, and attitudes that are very different from yours. Culture gaps are real, and they are not going away. If you are going to work with counter-party, then these differences will be part of your business — and part of your life.

Say “thank you”. The Chinese side is supplying your with free information. They are illustrating who they are, what they care about, and how they react to situations. Accidental honesty is the most significant kind. Behaviors are deeply rooted and consistent. Ignore them at your own risk.

Hupert then counsels you to take the free lesson and use it to analyze your Chinese counter-party: “It is your job to understand his attitudes, his values, and his culture.” And then you need to make any necessary adjustments in your own behavior, your deal structure and your business plan to reflect what you just learned.

Doing the right thing in these conflict-ridden situations is a tough thing because “it is human nature to do just the reverse – analyze us and attempt to adjust our counter-parties, but this only leads to conflict, failed deals, and value destruction.” Hupert concludes by calling on “breaking the cycle” by building “a negotiating plan that acknowledges (and even leverages) cultural differences.”

Great advice. Do you agree?

For more on what it takes for successfully negotiating with Chinese companies, check out the following: