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 around you. So here are a few key principles for negotiating in the land of the dragon.
PART I
1. Be Objective
Many stories about China are exaggerated, one way or the other. We've heard of fabulous deals, providing goods and services at a fraction of local costs. We've heard of toxic Chinese products and business tycoons who will cheat you at the drop of a hat. But China is neither black nor white, and a successful business person needs to strip away the political agendas that get in the way of sound business decisions.
We should also be wary of snap judgments by people who bail out impatiently with accusations of rampant deception and contracts never honoured. Certainly we should heed all warnings of danger, and be constantly on our guard. But we must seek a realistic view, neither wearing rose-coloured glasses nor seeing treachery in every misunderstanding.
It's important to be realistic regarding 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 proper 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 common ground which produces a good contract for both parties. That requires us to find a delicate balance between giving our opponents the benefit of the doubt when we fail to fathom the purpose of their actions, and avoiding the risk that someone will take advantage of our trust.
We need to be careful about old advice. Any economy, in the years before it gets properly regulated, has a lot of leeway, and plenty 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 amazing pace. The Chinese have aspirations of becoming world economic leaders, and they fully recognize the need for strict professionalism and integrity to meet their goals. It's not much of a stretch, since there's no lack of professional pride in Chinese history. You'll find that your major cautionary task in this century, apart from normal vigilance, is to identify the modern high-quality firms and separate them from the rogue elements. At the same time, the Chinese economy is still in flux, and there are still enough 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 determine 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 important if you don't have much experience in the treacherous waters of inter-cultural negotiations. Try out a couple 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 business on the spot. We'll get the runaround, as befitting someone who isn't serious enough to develop a trusting relationship 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 highly developed 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 developed 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 either case, learn the culture first, and take your time.
3. Work with the Right People
Here's where a good knowledge of Chinese relationship structures is important. Certain people 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, perhaps 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 proper protocol in the east. You'll probably be escorted to several meetings and banquets, and the key officials will be present at some of them, but you won't really know who's who until late in the game. This is where you need your diplomatic skills, to show your respect for Chinese traditional ways at the same time as you badger them to get the proper authorities at the table.
Actually, the intermediaries do have considerable importance. They're there to do the grunt work of finding out what's possible, and to iron out the initial 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 careful to determine if they really are properly connected to do the job. You may end up with some peripheral agent - who cites great experience in dealing with western business, but who really 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 really little more than an English teacher 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 interpreter 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 search for the competent ones. Incompetence and inexperience are just as much trouble as dishonesty. Avoid firms dealing with westerners for the first time - they'll be out to establish their cleverness by taking you for a ride. Your best bet is a western-invested company with western executives at the highest levels. Check out everything.
4. Seek Clarity
A good western negotiator, with any sense of strategy, will not offer his opponent a clear picture of his ultimate goals or what compromises he will accept. Chinese intermediaries have an even greater incentive to disguise their specific objectives and, in fact, to keep shifting them as the negotiation proceeds. They don't feel obligated to adhere to their proposals from session to session, since they're not the deciders. They don't think it's beneficial for either 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 readily as we do. Don't expect to sign off some clause and then move on to the next, secure 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 everything is tentative until the final act, they may be quite evasive in the early stages. Or they may overstate a verbal agreement 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 straightforward 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 through a gentle style of communication - where individuals are not assaulted too directly with brutal facts. It's a communication style that comes into sharp conflict with our blunt and unfeeling western directness. The Chinese view their communication style as the essence of civilization, as distinct 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 finding what you need to know. Learn the trick of assertive indirectness.