Chinese negotiation rule: You do better when they need you.
Financial writers operate on the extremes – it’s always buy or sell, bull or bear. Negotiators – particularly those representing other people (lawyers, consultants, representatives) — have to take a more nuanced approach. There is a distinct contrarian edge to the craft of negotiation – and that’s especially true in China. The more cordial and hospitable the Chinese are to their foreign friends, the worse the bureaucratic hassles and the less attractive the deal terms. When Chinese partners and counterparties see you as the absolute last resort – the final devil left to deal with – then you are in a position to deal. Westerners need to find opportunities for leverage in gloomy headlines and dire warnings.
Negotiators are by nature contrarian – we look for the mismatch between different counterparties’ perception of value. Skilled negotiators know that it is easier to create winning proposals when there are disparities. Similarities are expensive – today’s buyer is tomorrow’s competitor. That was certainly the story for western deal-makers in China since 2008, when we started to be seen as disgraced charlatans with little to offer stalwart Chinese managers and courageous entrepreneurs Individual mainland organizations have done well in the last 6 years, but now their prospects are clouded by structural issues. Liquidity is tightening, SOEs are encroaching (even faster) into consumer markets, and the anti-corruption campaign is undermining traditional marketing & operating methods.
The news coming out of China has been bad for incumbents defending their market position in China – but offers new hope to outsiders looking to enter or alter their presence in mainland markets.
1) Cash is king again. From 2008 until 2013, we were the relatively poor ones in China, and we did not like it. As Beijing reduces the flow of capital to SOEs and official borrowers, Westerners will once again be valued as a source of cash and international credit.
2) Connections count for less. Guanxi isn’t dead, but it’s not as powerful as it once was. This cuts both ways. If you have skeletons in the closet, you are definitely right to look over your shoulder. But if you are new to China – or haven’t left a paper trail — then this could be a great time for you.
3) You may have a hometown advantage. Chinese privates are finding the situation in China less and less hospitable, and they want to move overseas. The problem is that they haven’t done a very good job at marketing in Western markets. Your problem is that you can’t market very well in China. There may be plenty of room for new deal points here.
Low hanging fruit is great for marketers, but negotiators shine when they can develop competitive advantage through creative deal structures and complementary interests. We do our best work when the situation is most challenging.
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