Negotiating with Chinese in your Home Market

The Chinese are coming…to spend, partner and raise their kids in your neighborhood. Be ready.

Whenever I step foot out of the NYC area, I get questions about how American sellers should approach mainland Chinese buyers. New Yorkers think they’ve got it all figured out (though I’m Learn to negotiate in China with China Soovenot sure mainland visitors agree). That may just be part of the jaded NY passive-aggressive, semi-hostile attitude of “if you can make it here” that we show towards everyone – local and tourist alike. Mainland Chinese buyers and counter-parties, however, are becoming significant players in the mainstream US  economy. The first place we’ll see them is as spendy-vacationers and real estate buyers, but expect to negotiate with more Chinese who are buying companies, forming US-based partnership, being head-hunted by HR departments, and setting up stand-alone commercial ventures. Just because you aren’t going to China doesn’t mean you won’t be negotiating with a mainland Chinese counter-party in the future.

5 Tips for Negotiating with Mainland Chinese in Your Own Backyard

I’ll be looking at this topic in a lot more detail in future weeks, but here are 5 tips for dealing with mainland Chinese negotiating counter-parties  in the US

a) Get the lawyers and bankers out of the room in the early stages. Americans tend to lead with the contractual details and legalese. Chinese in the US aren’t as relationship-oriented as they are back in the mainland, but it’s still intimidating and off-putting to them. You don’t have to worry that much about guanxi and networks when they come knocking on your door, but you should establish a big-picture dialogue early. Relationships lead to transactions.

b) Don’t ask where the money comes from (until you have to). Due diligence is important, and you will have to check out your Chinese counterparty when transacting in the North America or Europe. But tread carefully on the “sources of income” issue. A lot of the money showing up to buy US real estate and high-value assets comes from corruption or money transfers that bend or break PRC capital control laws. In the US, asset levels and sources of income is an early-phase screening question. When the counterparty is from mainland China, you have to find other ways to qualify buyers, and put off the due diligence until later.

c) If there are kids involved, it’s all about education. If you are involved in real estate, then know your schools. Good public schools in the neighborhood a huge plus – since mainland Chinese are the last known people on earth to respect the US education system. Know the stats, be familiar with extracurricular options and have detailed info on private and public options in the neighborhood. Don’t worry so much about parks, recreational and athletic facilities. Even if the kids plan on making use of them, the parents still feel they gain face if their kids look like studiholics.

d) They see themselves as international elite but still want access to Chinese stuff. Don’t go too heavy on the Chinese culture available in the area. Mainlanders with money see themselves as part of the global elite, so their buttons are aspirational purchases and acceptance by the dominant group. They respond to “you are joining the 1% status” much more than they do to “familiar Chinese masses in Manhattan”. Your job is to know where other Chinese 1% shop and access familiar services (particularly if they are traveling or living with elderly parents), but spend your time talking about the European and Ivy League neighbors and colleagues.

e) Be a real American. When Japanese money came to the US in the 80s, all the brokers and headhunters took Japanese lessons and treated their counterparties like trauma victims who would were about to break down from terminal culture shock. Chinese clients and buyers aren’t like that. They know they’re over-seas, and probably worked hard to get here. When Westerners pretend to be Chinese, they dilute their value and risk embarrassment. Chinese clients come from a society where insider knowledge and connections are tied to success and effectiveness. When you are competing with an American-Chinese or mainland Chinese agent or salesman, your advantage is that you are a “real American” and can steer your mainland client through this strange and hostile market environment.

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read here-smallIf you haven’t already read the report “10 Common China Negotiating Mistakes”, please download it.  We are in the process of developing an interactive online course based on the report, and are looking for 10 beta testers.  If you are interested, please get in touch.

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