Blog: Business Practice
When Chinese dreams meet the real world
April 16, 2010: Western negotiators in China need to keep their heads out of the clouds
The key predictors of success for Westerners negotiating in China have nothing to do with culture, exchange rates, face or guanxi. Good planning, realistic goal-setting and a reasonable range of alternatives are the keys to negotiating success in China – just as they are anywhere else in the world. Westerners often board flights back to the US or Europe with a signed deal (or worse – a firm promise) and drift off to dreams of "done deals" and "mission accomplished." They will soon wake up to the reality that, while they have made binding and quantifiable commitments, the concessions they've extracted from the Chinese side are soft, vague and open to endless reinterpretation.
Here are five tips to rouse the sleepy international negotiator in China:
Westerners dreaming of Chinese profits must wake up and structure deals that have real meaning in China. Otherwise you may find yourself trapped in the nightmare of justifying a bad China deal to your New York or London bosses.
Andrew Hupert is an adjunct professor at New York University in Shanghai and publisher of ChinaSolved and ChineseNegotiation.com.
Here are five tips to rouse the sleepy international negotiator in China:
1. Plans and dreams are different. I always ask clients and students what they want out from their China negotiation, and the answers can be disturbingly vague. A deal-maker in New York or London will be able to give highly detailed predictions about the outcome of a domestic negotiation, and describe his goals, expectations and bottom line in specific amounts and time-frames. Novice negotiators in China tend to say things like, "I just want a signed a contract," "I want the best deal I can get" or even "I want to make a lot of money." Chinese counter-parties can hardly be blamed for helping themselves to gifts presented on a silver platter.
2. There is a Chinese metric system – how do you measure a "win"? Western deal makers who have highly specific goal systems are the most successful in China. Experience counts and sophisticated negotiators in China know what to ask for. Amateurs demand that onerous penalty clauses get inserted into English-language contracts that don't mean anything in local courts. Pros want the right to pick the financial controller who keeps the company chops in his office safe. It takes experience and research to know what to ask for in China because success is measured differently here. If you want to do American deals, then go to the US. When you come to China, make sure you know what to ask for and how to measure success.
3. Be careful what you wish for – beware the slippery yes. Western negotiators are still sacrificing real deal points for timetables that can't be enforced and "best effort" concessions that are impossible to measure. Chinese dealmakers are experts at creating phantom deal points to exchange for real assets, intellectual property and hard currency.
4. What's their POV? Westerners take comfort in the notion that the new market-driven Chinese deal maker is as profit-oriented as a Wall Street banker. While this isn't false, it's important to consider how the Chinese side assesses a deal's success or failure. Often the Chinese side values the deal differently – they may be more concerned with accessing your brand, trademarks, methods, IP or designs now, and are less worried about a bigger percentage of uncertain profits that may or may not be earned later. One of the reasons Westerners often find a seemingly low "China Price" so expensive in the end is that they and their local counter-party were negotiating for something completely different.
5. Prepare now for the second negotiation. If you are failing to plan for a second post-signing negotiation in China, then you should plan on failing. Westerners are the only ones who think that a signed contract stops clocks and seals the deal in amber. Chinese consider contracts a useful tool for recording a meeting of the minds at a specific time under certain circumstances. In relationship-oriented Chinese business, the negotiation is never-ending.
2. There is a Chinese metric system – how do you measure a "win"? Western deal makers who have highly specific goal systems are the most successful in China. Experience counts and sophisticated negotiators in China know what to ask for. Amateurs demand that onerous penalty clauses get inserted into English-language contracts that don't mean anything in local courts. Pros want the right to pick the financial controller who keeps the company chops in his office safe. It takes experience and research to know what to ask for in China because success is measured differently here. If you want to do American deals, then go to the US. When you come to China, make sure you know what to ask for and how to measure success.
3. Be careful what you wish for – beware the slippery yes. Western negotiators are still sacrificing real deal points for timetables that can't be enforced and "best effort" concessions that are impossible to measure. Chinese dealmakers are experts at creating phantom deal points to exchange for real assets, intellectual property and hard currency.
4. What's their POV? Westerners take comfort in the notion that the new market-driven Chinese deal maker is as profit-oriented as a Wall Street banker. While this isn't false, it's important to consider how the Chinese side assesses a deal's success or failure. Often the Chinese side values the deal differently – they may be more concerned with accessing your brand, trademarks, methods, IP or designs now, and are less worried about a bigger percentage of uncertain profits that may or may not be earned later. One of the reasons Westerners often find a seemingly low "China Price" so expensive in the end is that they and their local counter-party were negotiating for something completely different.
5. Prepare now for the second negotiation. If you are failing to plan for a second post-signing negotiation in China, then you should plan on failing. Westerners are the only ones who think that a signed contract stops clocks and seals the deal in amber. Chinese consider contracts a useful tool for recording a meeting of the minds at a specific time under certain circumstances. In relationship-oriented Chinese business, the negotiation is never-ending.
Westerners dreaming of Chinese profits must wake up and structure deals that have real meaning in China. Otherwise you may find yourself trapped in the nightmare of justifying a bad China deal to your New York or London bosses.
Andrew Hupert is an adjunct professor at New York University in Shanghai and publisher of ChinaSolved and ChineseNegotiation.com.
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