China negotiating guru Andrew Hupert’s new post, Negotiating in a Slowing China, discusses how China’s economic slowdown is going to impact negotiations with Chinese companies. According to Hupert, the slowdown is not going to have all that much impact, for the following three reasons :

  • There’s a filter bubble.  Chinese bureaucrats and SOE bosses don’t see reality the same way American and European MNC managers do.  Within China the official party line is that everything is going according to plan. It’s rebalancing and the expected results of a successful anti-corruption campaign. Everything is fine. Don’t assume that your Chinese counterparty is as nervous or anxious as you would be at the start of a sustained recession. He may still feel that time is on his side.
  • It’s your fault. Official Chinese media has a stock response to any and all bad news in the Middle Kingdom – blame outside agents. From the protests in HK to border disputes with neighbors to generalized economic trends, it’s a safe bet that foreigners are being pinned with responsibility for anything that goes wrong. Even if your direct counterparty doesn’t blame you personally, he is subjected to persistent official whispers that Westerners are responsible for his problems. Don’t position yourself as a white knight when he’s hearing that you are a black hand.
  • Fundamentals haven’t changed that much. Unless you are dealing with a Tier 3 property developer or one of the big state-owned banks, the chances are your counterparty isn’t feeling too much pain yet. That may change in the long run – but it may not. Let’s be honest – the Western business press loves the China bear story. The headlines you are reading sometimes make it seem like the Chinese economy is in a lot worse shape than it is.  The dour mainstream view is something along the lines of 4% growth by 2020. That’s not bad by international standards, and most Chinese managers still like their odds in the domestic market. The Beijing bureaucracy is as difficult as it’s ever been. Few people in Chinese business or the Party see global integration as a solution – more often it’s considered part of the problem.

For two reasons, I think he’s exactly right. One, his analysis makes complete sense. Two, we too have seen no change.

What are you seeing out there?

  • On the Corner

    I don’t agree with the 1st point. The Chinese know full well that the economy has taken a dump. As a 20 year veteran on the Mainland and speaker of Chinese, what’s said behind closed doors and in public to save national face are two different things. Associates readily admit to me that things are heading for trouble in a major way… many are just hedging their bets that the “dumb foreigner” can’t see the truth. Acting like their is no problem and that time is on their side is a fundamental concept of the Art of War. Remember, all warfare is based on deception. The Chinese government’s so called engineering of the slowdown is a pipe dream for the foreign media to smoke from. The reality is they are in reactive damage control by getting out in front of the slowdown and claiming to be the “driver” of a shift to domestic consumption is a joke…as domestic consumption continues to spiral lower. Does anyone really think that the government has engineered this dramatic change since 2012 or that the jig is up and the meltdown in the manufacturing sector can be no longer hidden? The reality is they are in the same wagon rut as Japan and its 20 year malaise. The only thing that’s been engineered is the claim by the almighty party that it’s guiding the current down turn….sorry boys and girls the dog is dragging them on the leash.