Chinese negotiators have an undeserved reputation for being risk-avoiders. Books and speakers tend to generalize Chinese businesspeople as being unusually sensitive to risk or loss. This causes confusion for westerners negotiating in China when they are suddenly confronted by behavior on the part of the Chinese that seems extremely risky. Chinese, it seems, are sometimes extremely cautious but can also have a penchant for blithely playing long shots. What is the true picture?
Chinese negotiators are not particularly risk averse. In some cases, they seem to go out of their way to take risk. What they hate is uncertainty. If they don’t see all of the pieces to the puzzle, they hold off. If all the pieces fit together to show a risky situation, he may take the deal and he may not.
If you tell a Chinese counterparty that venture X has 30% chance of paying off, but that he can expect returns of Y if it is successful, then he will consider it – even though you might feel it’s too risky.
If you tell a Chinese counter-party that the chances of venture X paying off are unknown, then he probably won’t proceed no matter what the payoff.
Chinese attitude towards risk when the parameters are known (or at least seem to be known) probably skews a bit higher than the average western businessperson. Westerners – particularly Americans – seem to do better with uncertainty.
Chinese negotiators don’t like working in the dark. American negotiators will develop work-arounds, incremental strategies or make best-guess projections based on what they do know. This drives Chinese negotiators nuts – they think it’s crazy to proceed when you don’t know exactly where you’re going. The Chinese counter-party – when confronted with unknowns or uncertainty – usually opts to wait until the situation becomes clarified. If they can’t gather new information themselves, then they will often choose to wait until the environment shifts and makes the situation less uncertain. This drives American negotiators nuts – they think it’s crazy to stop making progress and give up momentum for no reason.
The misunderstanding grows worse when both sides start talking to each other about RISK when the real problem is UNCERTAINTY. Remember – risk refers to the probability of an event occurring (though some definitions encompass the degree of loss). Uncertainty refers to whether or not parameters and probabilities are clearly and accurately understood. There’s an excellent chance that you and your Chinese counter-party are talking about two completely different things when you are throwing around the word, “risk”. If you back up a little and discuss your situation from a broader, less opaque point of view, you may find that you and your Chinese counter-party aren’t as far apart as you had thought.
There is always the danger of misunderstanding between any two parties in a negotiation. The risk of uncertainty is much higher when you are negotiating in China.
Please help with a quick, simple, anonymous survey:
My name is Andrew Hupert, and I’m a teacher and writer in Shanghai. I am now working on a project for my International Negotiation class at New York University’s Shanghai campus (in cooperation with East China Normal University). Thanks very much for your cooperation in my research. I would be happy to share raw data with any participants who wish to see it, and will publish my findings on ChinaSolved.com, ChineseNegotiation.com and DiligenceChina.com.
Thanks very much for your cooperation.