Negotiating to Win in China – Part 3: Sources of Power

Sources of Power in China:  Walk This Way

 In part 2   we talked about the dualistic nature of the Chinese psyche– ordained to lead / cursed by fate to follow.   These two extremes of the pendulum arc show the challenge of negotiating Sign up for the ChinaSolved newsletterwith the Chinese – and the solution.

At one end of the spectrum, Chinese negotiators believe that they are really predestined by heaven to rule above the barbarian horde.  Zhong  Guo is Chinese for China – it means middle kingdom – as in between Heaven and the Underworld.  You are a denizen of the underworld – a barbarian without grace or honor.  Sorry.

The other extreme is that Chinese believe that the West surpassed them long ago, and that Western methods are genuinely better.  That’s why they entrust their most valuable treasure to the West – the education of their children.

How do they manage the conflicting forces?  Simple – they look out the window.  If the wind blows from the West, they’ll do their best to follow the conventions and role models of the US (when it comes to business).  If China is ascendant, they become super-nationalists.  (Ask an old-timer who was in HK when it was handed over from British control to China.)    Both impulses are always present – the Chinese negotiator manages and draws on each without skipping a beat.


In China Your Technology Makes You Prey – Not Powerful

Nationalistic Chinese feel that you have the lead right now but only through an accident of fate – a shortcoming of their own leadership or a betrayal and trickery on the part of the foreigner.  Westerners blundered onto some magical secret and have been pressing their advantage since the Song Dynasty (1279).  That’s why, according to patriotic commentators and news agencies, Western laws and policies are focused on holding back China – because if both cultures started on an even footing then China would dominate.

Self-effacing Chinese may think that the West is doing something right, and that their advantage lay in their process, methods and education.  That explains why many Chinese are quick to dispense with traditional culture and recast themselves in a Western mold.  Thus the mania for Western education, food, and lifestyle.  This also explains the thirst for Western technology, IP and brands.

Either way,  China wants what you’ve got – but that doesn’t give you as big a bargaining advantage as you might think.  Your technology, methods and know-how are the bait – not the hook.   Remember – the Chinese negotiator feels that he can take what he needs.  Once in a partnership with you, he is going to close the knowledge gap as quickly as possible – starting during the negotiating process itself (and ending there, if you are not careful).   As soon as he has come close to mastering your technogly and IP, he begins to feel that you are in the way.  He’ll do better without you.  Once he understands how to manufacture your technology or master your business process, he begins to see you as a competitor – one that will whither and die without him.

Negotiating Power in China – Walk This Way

Western negotiators say that power is your ability to walk away from a deal, but in China this seems to play right into the hands of the Chinese side.  They feel they can do better without you, now that they have your assets, your technology, IP and customer list.  In fact, everything they do seems designed to FORCE you to walk away.    

But you do have power.  It’s your ability to walk away from them – and to another Chinese partner.

They aren’t afraid of you leaving them and going out on your own because they think that without them the opportunity will fade away.  Breaking the partnership carries no opportunity cost for the Chinese partners because once they have unlocked the secret to your tech and IP, you don’t serve any purpose or represent a competitive threat.  But if you go to another Chinese partner – they will not only lose the opportunity, but someone else will get it.  A Chinese negotiator isn’t afraid of YOU – he thinks that now he has your technology he can out-perform, out-deal and out-last you.  But he is afraid of other Chinese that will use your secret to take profits away from him.

How can you leverage this Achilles heel of the Chinese negotiator:

    1.  The ABC of Chinese business – Always Be Connecting.  You always have to expand your network of connections.  The more options you have, the more valuable a partner you become.
    2. Be self sufficient in China.  Hire your own translator and PA – make your own hotel reservations.  Tell them you are coming from other parts of China – and leaving to visit others.  If you allow them to arrange your accommodations, fill your schedule and shuttle you around like a helpless child, then they are neutralizing your most potent negotiating weapon – the ability to network with his competitors.
    3. Develop business in another city in China.  Don’t work though his network – you’ll just give him more control over your activity.  Don’t let him pick your suppliers, your distributors (if you can avoid), your staff, or translators.
    4. Make it sound like you have a lot going on – which is easier if you really do.  Network.  Go to mixers.  Take other meetings.  I know, you’re jet laggy, you are tired, you want to go home.  Tough.  In big American cities, there is always some event.  In China, hook up with AmCham and all the other chambers or networking organizations.
    5. Always be more valuable tomorrow than you were yesterday.  Don’t offer exclusivity or territory unless there is a good reason.  Be nice, but be tough.  Hold something back so that you have more to offer, and have a (specific) wish list of things you want from him.

Should you tell him you’ve got other irons in the fire?  If you tell him early, it becomes a normal part of business.  Tell him late and it’s a powerful threat, but could blow up in your face if you are bluffing and he calls it.  If you don’t tell him and he finds out on his own—it will undermine trust and trigger negative aggressive behavior.

Part 1: Analysis and Adjustment

Part 2: The Pendulum Swings Back


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