The New Chinese Negotiator: From Harmony to Our Money (Part 1)

China’s international negotiating style has been changing over the last 2 years, and those of us with commercial interests here have already glimpsed what the future will bring. China’s fortunes have been rising just the West’s have been falling – and in the new decade we will confront a more confident, assertive and monolithic China.

When it comes to China’s negotiating style, what’s new is what’s old. In many ways Chinese negotiating is shifting back to a more traditional style where the power of the state is paramount and the main job of rulers is to defend Chinese territory (be it physical, financial or symbolic) & keep the barbarians outside the gate. There is a new feeling in China – not isolated to Beijing – that the Deng Xiaoping’s grand experiment has accomplished its mission. International cooperation has served its purpose – now Beijing can get back to business as usual. Policymakers seem to believe that multinationals and local entrepreneurs were important steps in China’s development, but now they have outlived their usefulness. What’s good for the Party is good for China, and vice versa.

Look for 5 big trends to characterize Chinese negotiation in the coming decade. Most are already evident on the national stage, but dealmakers at every level will quickly find that Beijing sets the tone for the rest of the country.

    1. China steps up to superpower status.
    We’ve been tiptoeing around this for years, but Wen Jiabao’s Copenhagen gambit seems to confirm that Beijing is through playing coy about its status in the world. For years local Chinese would feign astonishment when asked if the PRC counted as a Super – hemming & hawing awkwardly before finally admitting to being “important economically – but certainly not a military or political force in the world”. But while an emergent 1960s USSR blustered and threatened, rising China will initially take a softer, more passive-aggressive approach. Khrushchev banged on a table with his shoe – Wen Jiabao convened a press conference to publicly worry about the integrity of US Treasury Bonds.

    2. Head-to-head, zero-sum competition with the US
    China’s default negotiation position is zero-sum game/ competitive – and there doesn’t seem to be a crisis big enough to get the US and China pulling in the same direction. In the last 2 years we’ve witnessed a financial crisis, a climate showdown, terrorist threats and the emergence of rogue nuclear states – and in each instance China and the US have been at odds with one another. If the two can’t agree on the scary but simple stuff (nuclear Iran, reduction of greenhouse gases, a functioning global banking system) then it seems unlikely that we’ll find a way to cooperate on more complex issues that don’t threaten the survival of humanity. China is reverting to the pre-Deng doctrine that what is bad for America is good for China – and vice versa. Look for China to continue to find opportunities in American & Western challenges.

    3. State-control of all negotiation agendas
    Not long ago, Western pundits were positing a China where entrepreneurs and an emerging middle class would exert greater influence on the CCP and bring about a kinder, gentler PRC. Well, just the opposite is occurring. The party has co-opted (or arrested) successful entrepreneurs and glamoured the urban middle class to the point where there is only one voice in China – the official one. Xinhua has done a phenomenal job of taking charge of the internet and the rest of the media, expertly using 21st Century technology to deliver an old Imperial message – that the fortunes of the Chinese people and the Chinese leadership are as one. In the last few years Beijing has learned that the party need not own the means of production to control them. State Owned Enterprises are a burden, but policy directed enterprises are the assets that keep on giving. Scratch a private Chinese business and you’ll find a policy-driven organ of the bureaucracy

    4. RMB hegemony – from Harmony to Our Money
    Beijing goes out of its way to promise that it will never resort to the sort of brutal hegemony practices by Western colonial powers – at every Chinese military parade and naval exercise. But it’s not the gunboats – or even the cyber-squads – that should raise alarms. The new projection of Chinese power will be infrastructure projects and commercial deals. China’s foreign policy is driven by a need for raw materials, and it isn’t squeamish about who it has to get in bed with to obtain them. Sudan, Iran, Sri Lanka, Afghanistan and Myanmar/Burma are just a few of China’s most favored nations, and for now Chinese policymakers don’t see a downside to enriching warlords, dictators and tyrants. China favors a dual purpose string-of-pearls approach that is already well developed – and expanding steadily.

    5) Its not about the economy, stupid.
    Non-economic considerations drive Chinese organizations, as long-term policy concerns ace short-term profit/loss decision. For years Western dealmakers were driven to distraction by Chinese counter-parties that seemed blind to their own self-interest. It’s not that the Chinese side was dim or daft – rather they were driven by non-economic factors like policy, bureaucracy, relationship, technology and access to intellectual property. For a while it seemed that all of those returning MBAs and MNC-trained local managers would influence Chinese negotiating practices and usher in a more ‘rational’ decision-making process. Beijing’s stimulus program, however, has once again made central policy the 600 pound panda in the room. This is why the rationalistic arguments about the RMB-USD exchange rate eventually conforming to market forces at best unrealistic – and at worst, completely irrelevant.

What does all of this mean to US negotiators in China? The bad news is that Beijing sets the tone – and in many cases the substance – for Chinese dealmakers all the way down the line. The good news is that now you know the bad news (as is often the case in China).

Next – Surviving the New China Negotiation

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