When Good Chinese Business Relationships Go Bad

Sun Tzu had his moments, but the best Chinese negotiating advice comes from Lao Tze in the Tao Te Ching. Deal with problems early – before they turn into crisis. (Or as he puts it in Chapter 63:

Deal with the difficult while yet it is easy;
Deal with the big while yet it is small. )

If you are having difficulty with a Chinese partner or counter-party, ask yourself a simple question – what will happen if you do nothing? There are three possibilities:

    A. It will go away by itself if you are patient, friendly and talk over your differences calmly.
    B. It will persist at exactly the same level of inconvenience forever, so the work-arounds and compromises you have already made will be sufficient.
    C. It will get worse and worse until it ultimately threatens to undermine your business.

In China there’s a strong chance the answer is C. Chinese negotiators aren’t stupid, yet they aren’t particularly innovative. If a tactic works for them once then they will keep doing it. It’s up to you to change the game.

China relationship game-changers.

    1. Raise your BATNA (Best Alternative to No Agreement, or no-deal option) by upping your skills, knowledge and abilities.
    2. Add a new player to the mix.
    3. Capitulate.
    4. Walk away slowly.
    5. Run away.

Let’s look at these options in a little more detail:

1) Raise your BATNA, or no-deal option.
If you are relying on your Chinese counter-party for basic market and business information well into the negotiation then your currency is probably dropping in his eyes. Hire an assistant, or better yet spring for someone more high-powered, but do something to develop your own flow of reliable industry information. Experienced deal-makers who are based in China consider this advice simplistic, but many overseas negotiators never seem to figure out that they are getting all of their data from a counter-party who has a vested interest in keeping things as confused and opaque as possible.

2) Add a new player to the mix.
Find an alternate counter-party or spread your risk by taking on additional suppliers or marketing channels. Don’t give away exclusivity unless you are absolutely certain you can rely on your partner – and even then its one of the riskiest decisions a Western negotiator can make in China. Once your Chinese counter-party thinks the balance of power has shifted in his favor then the relationship goes into a nose-dive. Local Chinese are always looking for a bigger & better partner – so should you.

3) Capitulate.
Give in. Do it his way. Maybe the Chinese side has a point. Maybe you are better off just giving in. After all, there’s a good chance that the right partner really does know what he’s talking about and you don’t. For the non-China expert, this isn’t always a bad option. Particularly true if your business involves marketing within China.

4) Walk away slowly.
For all their talk of harmony and consensus, Chinese negotiators are basically power-players. They respect strong counter-parties and are opportunistic & cut-throat when dealing with weaklings. If you aren’t ready to walk away, then expect to get taken advantage of. But having a Plan B isn’t enough – you have to know how to deploy this tactic in China. The best way is to be polite – even friendly – and tell your Chinese counter-party, “Well, it looks like we won’t be able to do business this time. Hopefully we’ll meet again under different circumstances. Thanks for all you’ve taught me about doing business here.” Smile and walk away – slowly. In many cases your counter-party will come back with better terms. Even if he doesn’t, you are better off making the move – provided you have already set up an alternative option.

5) Run away.
If your relationship is truly gone to hell, then your best option may be to burn your bridges and get out of there immediately. Some people are simply more valuable as enemies than friends. If your counter-party is actively stealing from you or worse – engaged in illegal or reputation damaging activities – then you are much better off being the one to terminate the relationship. Running away is different from walking away slow, because in this scenario you have no interest in keeping even a pro-forma relationship going.

A final option that may seem counter-intuitive is well suited for some Americans – force a conflict and make them mad. Yes, this is a risky tactic, but when all else fails you may want to try to shift the balance of power back in your favor by provoking the Chinese side. I’m talking about forcing an open conflict in a situation that you feel has gone so far out of control that the status quo in simply untenable. If pushing you around has been working for them and they consider you a weakling, then you’ll never get this deal back on track. If they want a deal with you and you show a little spine, then they’ll find a way to accommodate. Your worst option is playing the role of damaged goods in a relationship a Chinese counter-party doesn’t value.


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