Doing Business in China: For the Win – or On the Sidelines

Americans doing business with Chinese counterparties have to pro-up and stop negotiating like sullen teens.

China business made two big headlines this week, and the shocking thing was that no one was shocked.  Mandiant broke the story that the Chinese government is the biggest data thief on the planet, using the PLA to systemically steal information from a wide range of global organizations on their own home territory.  Someone, somewhere was probably aghast, but most of the business world just yawned.  Fortune carried a story of a different type of invasion – this one launched by Chinese tourits whose overseas shopping spree netted American businesses a US $4.4 billion trade surplus in travel & tourism last year.

Learn to negotiate in China - online (from CTI and ChinaSolved)
Learn to negotiate in China – online (from CTI and ChinaSolved)

Too many US businesses absorb these conflicting data-points by splitting the difference and averaging the result into a “sullen teen” approach to negotiation and deal-making. They’ll decide to pursue deals in China, but reluctantly and without the preparation or commitment that they need to truly succeed. The result is a sort of managerial vacancy and death-by-delegation that leads to self-fulfilling disappointment – or as the Caterpillar board of directors described their due diligence failure leading to the Siwei fraud that cost shareholders almost $600 million – “distraction”.

Confident Riding the Bench – or In it To Win It

If you make the considered decision not to be in China, then that might be just great. It’s an extremely tough place to do business. It’s slow, unfair and frustrating. The playing field vis a vis locals is not level. Their rules are different and opaque. You have to do that whole relationship thing when negotiating. Boards and management teams that take the calculated risk of sitting out the China business until the environment changes may in fact be getting it right.

But teams that crunch the numbers or analyze specific opportunities and decide that the China business makes sense have to go all-in and win that deal. Half-hearted, vaguely resentful and distracted is a sure-fire recipe for failure in China. Americans have to learn how to speak to one of the most important negotiating counter-parties on the planet today.

What’s Love Got to do with it?

You can always tell which Chinese people really don’t like the West — they are the ones smiling all the time and asking polite questions. We Americans tend to wear our heart on our sleeve and telegraph our true emotions. Honesty may be the best policy in Sunday school, but it makes a lousy negotiating tactic. Here are a few ideas that will help:

  1. Decide if you want in or not. If you are going in, then go in to win. That means budgeting. When the Chinese want to cheat you, they smile, make dinner reservations across town and wear you down with a long, drawn out negotiation. If you are looking at your watch and squirming to get done with the small talk and sign the contract, you are going to get the short end of the stick.
  2. Do your own prep work. Know what you want and how you are going to get it. Americans are still relying on their counterparty for strategic business intelligence about markets, expansion strategy and HR issues. It makes you look weak to the Chinese side – and it is just sloppy.
  3. It’s a relationship negotiating culture. You have to open up — or stay home. We get it – you like separate work from personal life. Chinese however use relationship-building as a form of due diligence. If you aren’t willing to show them who you are then they assume that your intentions are dishonest and it accelerates the cycle of distrust and aggressive cheating. Sometimes they walk into the room planning on ripping off your IP – but sometimes they really are looking for a long-term partner. Protect against the worst case – but be prepared for the best.
  4. Respect but suspect. Pursuing a China deal doesn’t mean play-acting or pretending to be everybody’s BFF. Don’t act like you trust them – but tell them you want to cooperate to build a deal structure that protects everyone. Don’t be sneaky, sly or overly clever by telling them what you think they want to hear now and then becoming tougher later
  5.  Smile. Relax. Look like you are comfortable enough to be involved in the business for the long term. A favored Chinese tactic is to wear you down until you get tired and go away. Lose the awkwardness and resentfulness. Ok. We get it — you would rather be home with your family and not sitting at some banquet table on the other side of the world looking at some weird sea cucumber appetizer and trying to drink Moutai with a potential auto-parts supplier. If, however, you can’t get past the cultural barriers and figure out a way to communicate with your counter-party you are sabotaging your own efforts.

Stop negotiating like a sullen teen, and pro-up. You don’t have to love it, but you should always look polite, respectful, and at ease. You are not doing them a favor by working with them – and you’re not doing yourself any favors by coming across as distracted, uncomfortable and ready to bolt for the exit the first chance you get.

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