China sellers are afraid to pick up the phone when it rings. If deals aren’t collapsing completely then clients are demanding to renegotiate prices and terms. What do you do when the deal you thought was solid suddenly gets holes punched in it? This situation is tough anywhere, but Westerners dealing with Chinese buyers or partners will feel a sharper sting.
When you are the receiving end of a renegotiation call, you need a strategy. As quickly as you can, consider the answer to these 5 questions.
1 – What is motivating the call now?
- No, the correct answer is not, “they’re a bunch of cheap, cutthroat bastards”. In fact, there are three possibilities: First, they may be in financial trouble themselves. Second, they are being opportunistic and profit seeking. Third, they are being directed to renegotiate by their own bosses.
- None of these are good, and you are clearly engaged in Lose-Win negotiation from a position of weakness. But negotiating from weakness is still negotiating, not surrendering. Find out as much as you can about your Chinese counter-party’s situation and motivation. You may have more common ground than you think. At the very least, you should be able to gain information and a bit of transparency.
2 – Are there cultural issues?
- You see it as breaking a sacred trust. You and he have given your word and signed a contract. A man’s word is his bond. But the Chinese view of contacts is much more fluid. Your counter-party sees renegotiation as a fact of life. When the situation changes for one, it changes for all. Don’t blunder into a cross-culture debacle that will only harm your interests now and in the future.
3—Who is holding the money?
- Are they talking about paying less for something you’ve already delivered? In that case, you are in a seriously weakened position. But if they are talking about future orders or deliveries, you may have a bit more leverage.
4—What’s your recourse?
- You may have PRACTICAL legal options – or you may not. Where are disputes settled in your agreement? Beijing or NY? If you are playing by China rules, a lawsuit is not going to help you. Many Chinese contracts are written with an HK arbitration option, but even that is cumbersome and expensive (though much cheaper than court). Do you have any non-financial leverage? If they are in a much more powerful situation, your practical options for the future may boil down to “deal or no-deal”. In the short term, you want to get paid.
5 – Do you want this to get ugly?
- What is your BATNA? If you really need this customer or partnership, then you’re going to have to man-up and figure out a loss-minimization strategy. But if it isn’t worth the trouble, then make your most professionally cordial exit from the scene and get on with your business. The point is, very little is gained by making these issues emotional or personal.
Please help with a research project by taking a brief, simple & anonymous survey about US-Mainland negotiation. Click here to open online survey: http://app.icontact.com/icp/sub/survey/start?sid=6256&cid=355149
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 .
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