Students of negotiation know that Win-Win strategies require the counter-parties to focus on objective interests and not subjective, personal positions. This is true anywhere, and includes -but is not exclusive to -negotiations with Chinese counter-parties. There are, however, two characteristics of traditional Chinese counter-parties that make sticking to an objective, unemotional course more difficult. Those are the concept of ‘Face’, and mastery of avoidance tactics.
Structural Negotiating Issues in China
The nature of China-Western business negotiations leads to a common structure that can work against the visiting team. Many US and European businesses interested in accessing the Chinese market look for Mainland partners, marketers or strategic JVs. The danger here is that the western party must inject capital, technology and IP (ranging from logos and trademarks to advanced technical designs) BEFORE the Chinese side can start selling into the local market. This non-synchronous implementation invariably leads to an abrupt shift in the power balance the moment the injection of assets is completed. (Put another way, it encourages a real-life version of ‘taking your ball and going home when you are winning’). Assets are injected NOW, Chinese markets are developed LATER. This gives the Chinese counter-party a disincentive to continue the relationship. (In the US and Europe, civil lawsuits with the possibility of heavy punitive damages mitigates – but doesn’t eliminate – this risk. Chinese law reduces this threat – see ChinaLawBlog.com for the expert view ). For more structural analysis of Sino-Western negotiation, see:
Whether or not ‘face’ is a real cultural phenomenon, it still makes a great negotiating tactic. Your Chinese counterparty – who seemed almost oblivious to insult, cultural misinterpretation and offense before the contract was signed – suddenly turns into a hyper-sensitive powder keg once YOUR assets have been injected but his side has yet to perform. Many western counter-parties have been struck by how irrational and volatile their Chinese counter-parties can be – but it may be less accidental than they realize. Once the balance of power shifts, Chinese negotiators can become more emotional and prone to cultural misunderstandings. Tactically the ‘face’ issue combines with avoidance to form a very powerful position.
Negotiators fall into 1 of 5 styles: Collaborators, Compromisers, Yielders, Competitors and Avoiders. Many western negotiators have been impressed at how effective Chinese counter-parties can make use of avoidance tactics. There are many structural factors that give Mainlanders an advantage in this regard: the use of gatekeepers, time differences, language problems, and opaque corporate structure among others. See also: http://chinesenegotiation.com/2008/10/5-chinese-negotiating-styles/
http://chinesenegotiation.com/2008/10/chinese-negotiation-trends-revenge-of-the-avoiders/ Many US-based negotiators have learned the hard way that Chinese counter-parties can strengthen their position simply by not picking up the phone or responding to the email.
A perfect, passive-aggressive storm
The combination of structural factors, ‘face’ issues and adroit managing of avoidance techniques represent a real threat to western negotiators in China. The real danger is that you’ll never see it coming. These tactics are not considered desirable or admirable in the US, so the inexperienced negotiator tends to ‘give the Chinese counter-party the benefit of the doubt’ that they will be just as rationale, open-minded and even-handed as Americans. This is walking right into the culture trap. Just because you plan on a Win-Win negotiation that separates interests from positions doesn’t mean that your counter-party will reciprocate. Look at it from his perspective – if counter-party gave you a huge advantage, wouldn’t you capitalize on it? In chess, it is polite to warn of impending mate – but that doesn’t mean you allow the opponent to rearrange the board.