Western negotiators in China may be sending mixed messages without knowing it.
One of the key messages in the book, The Fragile Bridge, is that business conflict in China often starts without warning and spins out of control before the American or European even knows that there’s a problem. A common cause of deal-busting disputes in China is that the Westerner side works so hard to establish a good relationship that the Chinese side develops unreasonable expectations. In short, they thought you planned on giving up much, much more than you ever would.
When you were visiting China to meet with your new partners and establish a relationship you may have treated the banquets and conferences like a trade-show meet & greet or a sales call – full of back-slapping fellowship and blue-sky platitudes. You weren’t lying – exactly – just emphasizing the positive and being optimistic.
Unfortunately, the Chinese side may have put more stock in your up-beat generalizations than you did. For you, the banquets and meetings were just the prelude to the real negotiation. For them, it was the first step in a significant business relationship. Dishonesty and betrayal have different meanings. By going out of your way to be nice, friendly, and culturally sensitive during the early phases, you may be setting yourself up to look like a dishonest fake later.
There are two general classes of Guanxi teases that Western negotiators should beware of: The first is what I like to call “A Better You” and the second is “Empty Promises”.
A) A Better You
It’s great to make a good impression – and you already know that Chinese negotiators value relationships more than Westerners. So when you make your initial contact with a Chinese negotiating team, you naturally try your best to be pleasant, affable and agreeable. Just remember that to the Chinese side, these banquets, dinner parties and karaoke evenings aren’t purely social events – they are performing due diligence and market research. This is how they are getting to know who you really are and what your business philosophy is all about.
- “I love China” or “The infrastructure/service/energy is so great in China” or “(BLANK) is so much better in Shanghai than in Chicago.” You think you are being a polite dinner party guest, a fun drinking buddy and an open-minded world citizen. He hears a validation of his methods, customs and business practices. Keep your observations general – or focus on issues that aren’t going to be used against you later. Better phrasing: “we have so much to learn from one another”.
- “I’m looking for a long term relationship” Chinese negotiators have a somewhat undeserved reputation for being long-range planners. Being a long term partner in China often means chucking the contract and renegotiating on the fly as economic, market or financial conditions change. If you start off with the “long term partner” talk early in the relationship, you are giving up leverage and baking in some pretty big expectations.
- “I really understand you / China / your company” It sounds like a quick way to bridge the cultural divide, but you are really affirming his standard operating procedure. Later, when you try to get him to do things your way (which you’ll see either as helpful instruction or a mutually beneficial compromise), he’ll consider you dishonest, fickle or false.
- “Let’s all drink to harmony.” Any statement you make about harmony, guanxi or face/mianzi will get everyone toasting at the banquet, but the message the Chinese side takes away is that you plan on observing the unwritten rules of Chinese business. Later when you start talking about contracts, QC benchmarks and deadlines you come off as a conman.
The list goes on, but the point is the same one your mother made when you were a kid: Always Be Yourself. There’s nothing wrong with being pleasant and fun – just remember that this business has already started and you are not just making trade-show pleasantries that will be forgotten right away. In China, relationships are the subject of negotiation – not a by-product of successful transactions.
B) Empty Promises.
The danger in Chinese negotiation is that everything you say becomes a guarantee, while anything the other side promises is quickly forgotten. In the West we like our best case scenarios, our conditional approvals, and our trial balloons. When they ask about exclusivity, you’re likely to say something along the lines of, “if the numbers are there we can definitely consider talking about it…” and all they hear is “definitely”. Be careful about implying that you are more flexible, generous, patient or informal than you really are.
- Process. Do you plan on doing things the Chinese way forever? What’s the message you are sending them? Chinese companies have been closing the gap on business process issues like quality, HR, and finance – but many of your counterparties are simply not as organized or systematized as you are. If deadlines, QC or reporting is important to your business, make this clear right away. Don’t assume that they will improve later.
- Relationships, particularly as they apply to exclusivity, international support for their products and expansion within China, can be sticky. Your ability to find a new partner is your main source of power, and they will try to lock you into an exclusive relationship early. Don’t say anything that can be interpreted as a commitment.
- Scope – the size of your business of your business together. The Chinese are experts at sounding like they are making promises and projections while not really saying anything that can be used against them later. Do the same.
- Technology, intellectual property and designs are your competitive advantage in China, and you should plan on every potential partner, customer, supplier and employee trying to gain control of your IP. Don’t mention or demonstrate any technology you don’t want to share. Plan in advance what you are willing to share and don’t even refer to anything you don’t want your Chinese counterparties to eventually own.
Best Practices for Guanxi Building
- No small talk. It only sounds like casual, random chit-chat. China deal-making is all business, all the time. They have to know the real you. They don’t have to like you, but they have to believe you won’t betray them.
- Know where you want the conversation to go. A relationship building event isn’t an interview with a talk show host. You have to take a leadership role.
- All of your vaguest, most conditional promises are guarantees carved in stone – none of theirs mean a thing. Won’t even be remembered
- Manage the information exchange. That means not telling too much – but it also means you have to know what information you want to get.
- It’s a marathon – not a sprint. Building a relationship in China is a long-term mission. A whirlwind couple of days in Shanghai or Beijing is the start of a great relationship, but it doesn’t seal the deal.
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