Negotiating in China: Getting to Know the Real You

When negotiating in China, timing and timetables are among the most serious cultural barriers that westerners face. Some things seem to go much faster than they would back home, while other very basic processes seem to take forever.

Managing time across cultures is always challenging, but part of the problem in China is the way business people get to know each other. In the US, you’ll have a few conversations with a potential supplier or client – but usually there is very little real trust until after a few small preliminary orders. Transactions lead to a relationship in the West.

In China, the sequence is reversed. They have to know you and trust you before there is any business at all – even a test order. In China, relationships lead to transactions.

That leads to a very common disconnect in Chinese contract or deal negotiating. The western party tends to feel confident that it is on track for a final order just as the Chinese party is starting to feel that it knows who those westerners really are. Potential problems are compounded by the fact that to westerners, a signed contract is the finish line – while the Chinese consider it a written summary of terms and conditions at one particular moment in time. Western deal-makers frequently complain that Chinese counter-parties are constantly promising one thing and delivering another, stalling, or changing terms and conditions after the deal is signed. But to the Chinese side, this is all a normal process of getting to know who you are and what you want. And that’s where trouble starts.

Chinese counter-parties: Getting to know you.

This is the process your Mainland Chinese counter-party goes through between the time he first meets you and the time the first deal is concluded:

I know who you are
I know what you want.
I know what I want.

I know who you are’ is slightly different in China- both in terms of variables and methodology. They want to know who you are, what you do, who you represent and how important you are. If you someplace modern and international like Shanghai, then they’ll probably just Google you and check out your corporate site. If you’re not quite as lucky, this first phase could involve long nights of drinking bad baijiu. Plan early.

The main take-away for western negotiators is to not jump the gun and think you’re going to walk out of your first meeting or two with a signed deal. I’m still hearing stories about novice negotiators believing their Chinese counter-party was agreeing to deal terms when he was merely indicating that he understood the statement. Early-stage negotiations in China usually take a while – if yours is speeding along in a smooth, frictionless arc, then maybe things are too good to be true. One of the reasons ‘guanxi’ is such an important part of Chinese business culture is because they are NOT natural networkers and backslapping hand-shakers. Getting to know you is supposed to take a while. If your guys are too friendly too fast, it’s a red flag. In some international areas like Shanghai and Shenzhen, you may in fact move more at international speed. But beware of disreputable counter-parties who prey upon frazzled, overscheduled western execs by offering to ‘facilitate’.

I know what you want‘ can take a very, very long time in China. It can, in fact, take MUCH longer than you think it should. Westerners are always jumping the gun here, and assuming that their deal terms are crystal clear. If you are buying a container full of shower enclosures then this one won’t be too tricky (in theory). But if you are doing anything with marketing, sales, profit splits, IP or any other service-related terms, this could end up taking a very long time. Just a few years ago, any westerner in an IPR or service related business was advised by Chinese partners to switch to a ‘real product’ because no one in China paid for services. This wasn’t some kind of double-reverse fake or subterfuge on the part of the local partner – they just didn’t understand the western firm’s business model. Even well-meaning Americans tend to have this notion that if we speak slowly and clearly and repeat ourselves enough that others will understand our meaning. In China, just because they can repeat back the same words doesn’t mean you have achieved a meeting of the minds. This is a very common source of problems or westerners negotiating in China. Assume nothing.

I know what I want from you’. This is a tricky one since Americans usually know this walking in. It never even occurs to many westerners that their Chinese counter-party hasn’t figured out all the angles of the deal until pretty lat in the process. In some cases, they are still deciding what they want well after the contract document has been signed. It’s not always dishonest or unscrupulous, either. I have been in plenty of high-level meetings between Chinese parties where they signed contracts that were extremely vague in terms of pricing and deliverables. Remember – to the average Chinese business person, a contract is just a declaration of intent. They give it as much weight as an MOU (memorandum of understanding) in the US – they’ll do their best, but if conditions change then so must the arrangement. Of course, unscrupulous Chinese counter-parties abound, and this ongoing “what we want from you” phase can be a huge headache.

    Most Americans will try to head off these problems by insisting that their Chinese counter-party nods in solemn agreement and repeats back the key terms and phrases. All you are really doing is pushing the discussion back until after you have already left and have to unravel a mess of incoherent faxes and conflicting emails. You can’t rush the Chinese process, but you can facilitate it through better communication skills. When these guys are taking you out for lunch or drinks, they are dropping hints about what they consider to be outstanding issues. (Why they can’t just write them down in a memo so you can tick them off one by one is a subject of much contention – but it aint’ gonna start happening soon.) Pay attention to their continuing concerns about matters you thought were already “dealt with”. There’s a good chance you’ll be revisiting those issues once you are back home and telling everyone about your killer China deal.

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