Your first meeting with that potential Chinese partner was a heady rush of mutual admiration and ambitious plans for profitable joint ventures. But since then, communications have grown less frequent and your Chinese counter-party seems to have become less enthusiastic. You are connecting sporadically on the phone, and when you do speak or text the messages are more about obstacles and challenges than potential for unbelievable profit. But still, each message seems to end with vaguely optimistic musings about ‘everything somehow working out in the end’.
Are you still in the China business?
Chinese deals don’t die – they just fade away.
In the bureaucratic, harmony-oriented world of Chinese business, your potential partners may find it abrupt and unnecessarily rude to say “this deal is dead”. You are supposed to be able to figure that out from the context of the situation. From the Chinese perspective, it is much safer and kinder to just allow potential deals to just kind of wind down into a semi-permanent stasis. Who knows – maybe things will change or the environment will shift, and that sleepy worm of an idea will emerge as a beautiful soaring butterfly of profit. But if the deal isn’t meant to be, then the most politic and harmonious resolution is just to let it quietly fade away.
Closure is an American concept
You, on the other hand, have an entry on your To Do list that isn’t ticked off or crossed out. For American deal-makers, this is an itch you can’t scratch. You know that at some meeting in the not-too-distant-future, your boss – or his boss – will point that icy stare at you and demand a status update on the company’s great Chinese hope – the Shanghai Deal. You need to know exactly where you are, what needs to be done and most of all, WHEN THE DEAL WILL BE SIGNED. Anyone can see that, right? Well, no – not really. In much of the world, business deals don’t follow a linear progression from A to B to C. Many Chinese deal-makers find it pointless to kill off a negotiation – and the relationship that has grown up around it – just because it isn’t moving forward at this particular moment in time.
A 1% chance is still a chance.
Remember – your Chinese counter-party has the home-court advantage and knows how to use it. He considers his opportunity cost to be ZERO, so even a slim chance of pulling out a profitable deal still has economic potential. What about HIS boss or boss’ boss? Well, he’s probably the one who wanted the deal put on the back-burner in the first place. As far as the Chinese organization is concerned, this is appropriate and sensible. Every once in while one of those comatose deals perks up and starts working. If not, there are plenty of fish in the sea – and plenty of Americans on China-bound flights. They’re not losing sleep over this go-nowhere negotiation – you are.
Whose risk is it?
Risk has shifted to your side of the table, and so has the pressure to make concessions or offer new approaches. This is particularly true if you have A) talked up the potential of this potential deal to impress your bosses, B) spend time, money and resources to develop things this far, and C) have been so busy negotiating this individual deal that you don’t have anything else in the pipeline. By managing expectations and time, your Chinese counter-party has shifted risk and the balance of power in his favor.
Sometimes it’s up to you to put down a sick deal.
If a Chinese negotiator doesn’t give you a flat ‘NO’ at the initial meeting then there’s a good chance he never will. A key decision-maker at a private business may look you right in the eye and tell you that further negotiation would be a waste of everyone’s time. A bureaucrat or middle manager is much more likely to keep you on the hook and let you figure things out for yourself. If you are looking for a definite answer, then you may have to force the issue. Just remember, though, that a Chinese counter-party is likely to let you walk away even if he feels there is still a chance of doing business. Chinese deal-makers have been brought up to believe that there is always another opportunity around coming down the road – and that a bad deal is worse than no deal at all.
Always have fresh options in the pipeline.
Your first and last line of defense is always the same – have alternative deals in various stages of development. One of the worst things you can do in China is to get tied down to a single counter-party. The best – and sometimes the only – way to bring pressure to bear on a Chinese deal-maker is to let him think that a local competitor may be the one to shear his sheep.
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