Taiwanese and Chinese Negotiating Tactics Compared

Taiwan and China welcome foreign negotiators the same way – but say goodbye differently.

Sign up for the ChinaSolved newsletterI was recently asked by a member of the ChinaSolved Linkedin group  if there was difference between the way Chinese and Taiwanese negotiators behaved. It’s a great question that comes up often, but seems particularly appropriate now.

The bottom line is that negotiations with Taiwanese and Chinese counter-parties start out the same, but end up in different places. Westerners can be successful in both cases – but have to understand how negotiators from Taiwan and mainland China think about VALUE.

Same Talk, Different Walk

Negotiators who hail from Taiwan and Mainland China all have common cultural, historic and social roots. The same rules about harmony, face and guanxi networks apply. You can expect the familiar traditions of banquets, KTVs, and relationship-building to be observed. There is likely to be greater variance across generations than across the Straits. The over-40 set from both places are likely to treat the opening phases of an international business negotiation in a similar way – still heavy on tradition and personal relationship, though the timeline is becoming compressed and the pace accelerated compared to a 10 years ago. Shanghai and Taipei have more in common than Shanghai and Anhui or Taipei and Tainan. If you are negotiating with sophisticated, experienced counterparts in any major business center in Greater China (Mainland, HK & Taiwan), you are likely to encounter very similar negotiating styles in the early phases of your dealings.

PRC and ROC negotiators diverge when it comes to their attitude towards value creation. Taiwan, with its tiny domestic market and strong ties to the western supply chain, has historically made its money following international rules and conventions. Taiwan, along with S. Korea, HK and Singapore, was a pioneer of the OEM  business model, and traces much of its present-day prosperity to strict adherence to contracts and agreements with western clients in the 80s and 90s. Taiwan creates wealth by working within international legal structures and norms.

China, however, creates value by exploiting differences between their home-grown conventions and international systems. China is well known for observing rules when they help, but ignoring them when they become inconvenient. (McGregor’s No Ancient Wisdom does a great job of exploring how China has manipulated WTO regulations ). China did well with contract manufacturing during the 1990 and 2000s, but was already starting to outgrow the OEM model by the time of the Crash of 2008. China, with its vast domestic market and collectivist approach to governance, has a lot to fear from overly successful western corporations, and suspicion of outsiders is one of the hallmarks of Chinese society. Beijing’s willingness to reign in ambitious MNCs was evident even before the recent string of anti-corruption scandals.

Individual Negotiating Styles Reflect Economics

Taiwan and China have charted different courses as economies, and you can see it in the behavior of individual negotiators. Taiwanese deals tend to focus on long-term, highly structured transactions that leverage on their home-grown technological advantages. Companies like HonHai/FoxConn and ASUS add value to western partners by pushing the manufacturing envelop. The Taiwanese are masters at process engineering, and they offer clients a level of efficiency that can’t be matched anywhere else in the world – for the right price and deal terms. Chinese partners, however, are typically more interested in extracting technology, IP and business methodology from western partners – and are often willing to terminate relationships that have outlived their purpose.  Chinese negotiators know that local laws and regulations are usually interpreted to give the home team an advantage — and that the local market is their most valuable prize.

Taiwanese Charge Tolls, Chinese Shut Doors

The upshot is that Westerners can use similar methods to open doors in both Mainland China and Taiwan, but once the business relationship has begun they face two very different challenges. The Taiwanese negotiator structures his deal to keep the door open – but at terms that favor large volumes and long contracts. The Chinese side often benefits from slamming the door closed without warning once they have gotten an advantage.

Westerners can negotiate profitable deals in both mainland China and Taiwan, but have to understand how the other side understands value.

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