How to do business with Chinese managers who are still in denial about their changing role in the world.
Forget the Financial Times headlines about China’s rising international clout, and super-lux marketing campaigns targeting elite buyers in Beijing and Shanghai. Chinese media is still carrying the Party line about China as the struggling developing market – and your Chinese negotiating counterparty believes it to some degree. When approaching a Chinese negotiation, you have to take into account the conflicting roles that Chinese managers are grappling with. On the one hand they are brought up to see the Chinese Nation as perennial victim of foreign aggression, but they are also confident about their growing economic power.
Take a Page from Chinese Negotiators of Days Past
Economic powerhouses need love and sympathy too, and that’s what you are going to offer the Chinese negotiator across the table. Take a page from the Chinese dealmaker of days past. When Western businesses started testing the Chinese waters in the 90s and 2000s, we faced many of the same challenges that modern Chinese are dealing with in US and European markets. Chinese salesman and factory reps didn’t try reassuring us or handing us a lot of “everyone is basically the same” politically correct nonsense. No– they signed contracts by telling us how difficult China was, how easy it was for foreigners to get ripped off, how corrupt and terrible everyone was – everyone but THEM. We were so lucky we found the one guy in China who could do the job, had the right connections, understood their problems – and most important of all, was honest and trustworthy. Anyone else would skin the rich outsider alive, but your new best friend would protect your interests and guide you through the minefields.
Negotiating with a Reluctant Superpower
How do you negotiate with the newly international Chinese? Here are a few ideas to get you started:
1. Work the fears. Negotiators are motivated by hope for gain and fear of loss. Up until now, hope for gain has been China’s button — but going forward it may very well shift to fear of loss. If they are confident, remind your Chinese counterparty at you are both the richest guys in your respective neighborhoods — and other people want your stuff. If they are nervous, play on their fears about the about the troubled Chinese economy and offer them a new opportunity for stable profits with an international partner. Be the guy who can help that Chinese associate move to the next level (both in China and internationally) — or the guy who can help his competitors beat him to the punch and block him out. Make working with you the safe, secure option.
2. Chinese business has sunk costs now. During the “race to the bottom” days, Chinese negotiators never really understood what opportunity cost was. They just lowered cost (private factories) or threw money at problems (municipalities, SOEs). Now that they are climbing the tech ladder, building permanent structures and relying, on unique selling propositions Chinese business is a little less nimble than in years past. The attitude in China used to be that there was always another customer coming round the corner. They have started facing the Western dilemma that the most profitable counterparty is the one they are working with now. That gives you leverage — assuming you have the right partner and the right deal structure.
3. Bigger, better, faster, prettier. Now that Chinese middle class managers have stuff, they want more, bigger & better. That’s the thing about upward mobility — the more you have the more you want. A lot of potential partners and counterparties who passed on your offer a couple of years ago as too rich may be ready to talk again. Ironically, that may include the very people who ripped off your designs and product ideas. These days even 4th tier ugly duckling peasant workers have blossomed into beautiful, brand-conscious consumers, so the demand for quality is becoming mainstream. Quality and design are selling points now.
4. Think of the children. China’s original middle class is all grown up and having little middle class babies of their own. They have climbed the hierarchy of needs, and no longer feel blessed to have food on the table and 100 channels of nothing on the flat-screen. The new middle class is asking for things that China is having a hard time delivering — like a healthy future for those kids. If you represent a company from Australia, North America, or Europe part of your offering should include some option for your counterparty and his family to emigrate or at least live abroad for a while. Overseas postings are desirable again. In the 2000’s Chinese yuppies wanted the glamor and excitement of life abroad. Now those same people want to raise their child someplace safe and clean. Make that a negotiating variable.
5. The New Common Ground. In China “Us against Them” used to mean that you were Them and they were US. That’s changing. The PRC has moved from being the non-aligned beacon of righteous revolutionary struggle to scary economic superpower — in a very short time. China is now perceived as an international bully, inspiring fear, hatred, and violence from people that the average innocent, hardworking Chinese businessman has never even heard of — JUST LIKE YOU ARE. We understand each other. That’s the thing about first world problems — only other first-worlders understand your pain. Have a business solution that addresses their new first world problems, and you will strengthen your hand.
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