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:

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Photo of Dan Harris Dan Harris

Dan is a founder of Harris Bricken, an international law firm with lawyers in Los Angeles, Portland, San Francisco, Seattle, China and Spain.

He primarily represents companies doing business in emerging market countries, having spent years building and maintaining a global, professional network. 

Dan is a founder of Harris Bricken, an international law firm with lawyers in Los Angeles, Portland, San Francisco, Seattle, China and Spain.

He primarily represents companies doing business in emerging market countries, having spent years building and maintaining a global, professional network.  His work has been as varied as securing the release of two improperly held helicopters in Papua New Guinea, setting up a legal framework to move slag from Canada to Poland’s interior, overseeing hundreds of litigation and arbitration matters in Korea, helping someone avoid terrorism charges in Japan, and seizing fish product in China to collect on a debt.

He was named as one of only three Washington State Amazing Lawyers in International Law, is AV rated by Martindale-Hubbell Law Directory (its highest rating), is rated 10.0 by AVVO.com (also its highest rating), and is a recognized SuperLawyer.

Dan is a frequent writer and public speaker on doing business in Asia and constantly travels between the United States and Asia. He most commonly speaks on China law issues and is the lead writer of the award winning China Law Blog. Forbes Magazine, Fortune Magazine, the Wall Street Journal, Investors Business Daily, Business Week, The National Law Journal, The Washington Post, The ABA Journal, The Economist, Newsweek, NPR, The New York Times and Inside Counsel have all interviewed Dan regarding various aspects of his international law practice.

Dan is licensed in Washington, Illinois, and Alaska.

In tandem with the international law team at his firm, Dan focuses on setting up/registering companies overseas (via WFOEs, Rep Offices or Joint Ventures), drafting international contracts (NDAs, OEM Agreements, licensing, distribution, etc.), protecting IP (trademarks, trade secrets, copyrights and patents), and overseeing M&A transactions.