General Principles are the Terms and Conditions page of Chinese Negotiation

In Chinese negotiation, don’t confuse polite rhetoric with concerted strategy.

American and European negotiators treat their Chinese counterparties’ “general principles” discussion like the “terms and conditions” screen – we just check the box and look for the real content. Big mistake.

General Principles Discussion can come back to haunt careless negotiators

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Westerners in China often make important concessions without even knowing it. It’s common for Chinese negotiators to frame their position with a discussion of “general principles”. Westerners tend to shrug them off with vague agreement – particularly since these conversations tend to be phrased in vague, wooden rhetoric like “harmony and shared responsibility”. It all sounds like meaningless propaganda to us, and it mixes easily with the toasts, proverbs, unfamiliar historic references and folksy anecdotes that characterize a boozy banquet night in Shanghai or Beijing. Western negotiators tend to focus on transactions, and aggressive negotiators will make every effort to control the negotiating agenda and nail down concrete deal points – but the Chinese side never gives up on their deal points or general goals, regardless of the appearance of compromise or concession.

The 6th SED – Strategic and Economic Dialogue – between the US and China wrapped up last week, and US diplomats seemed to just be discovering something that Western managers have known for a long time — Chinese negotiators pay lip service to contentious issues, but don’t really change their objectives or behaviors.

The FT reported on American officials’ dismay that their efforts to influence China’s aggressive behavior in South China Sea has been ineffective:

“In June 2012, senior US and Chinese officials met in a hotel in southern Virginia to discuss a dangerous two-month stand-off taking place in the South China Sea. At the time, dozens of government vessels and fishing ships from China and the Philippines were massed in the lagoon of Scarborough Shoal, a reef 120 nautical miles from the Philippines’ coast claimed by both countries. A naval conflict seemed a real possibility. With typhoon season fast approaching, the US tried to broker a resolution. By the end of the meeting between Kurt Campbell, then the top US diplomat for Asia, and Fu Ying, China’s vice foreign minister for Asia, the US side believed they had an agreement for both sides to withdraw. The following week, the Philippines ships left the Scarborough Shoal and returned home. The Chinese, however, stayed in the area.”

Are Chinese Negotiators Liars?

American and European negotiators who focus on transactions and believe that contracts control actions often conclude that their Chinese counterparts are just lying when they go back on agreements or ignore their own promises.   The Chinese side, however, feels that they are staying true to the goals and negotiating frameworks that the Westerners already agreed to.

General Principles for the Western Negotiator in China

1. Have your own “general principles” and start by negotiating them in-house with your own people. You know in advance that the Chinese are going to make a play for your assets and IP. What are you going to do about it? Building on a strong foundation.

2. Avoid timing difference that have you injecting real assets now and them performing services later. Develop incremental strategies and flexible tactics.  Chinese negotiators who violate contract terms don’t show up with guns and masks like cartoon villains. It will be a battle of inches over years – precisely the kind of conflict that Americans lose. What is your plan for when they start swiping the coffee money and letting quality slide by 0.5% per order?  You need to prepare a response for low-intensity conflict.

3. Best efforts promises are worse than meaningless – they compel you and require real concessions, but don’t constrain the Chinese side. Focus on objective benchmarks and formal recognition of compliance & completion.

4. Don’t proceed until you understand exactly what they’re talking about. If something is vague, clouded by rhetorical flourishes, or sounds like an empty slogan, stop and unpack it. References to historical figures or folksy aphorisms need to be examined. The real danger is that you will agree to “general principles” without knowing it. While this might not be enforceable, it justifies conflict and claims of “Western arrogance” when you try to assert your own deal points. Conflict is a common and convenient justification for breaking off deals – usually after you have transferred technology or injected assets.

5. Plan for success. A year from now your brand will be more valuable and you’ll know more – how will that alter your position with your Chinese counterparties? Planning for success in China means having a growth strategy – and an exit strategy.

You know this is going to happen. You know that the Chinese will continue negotiating after the contract is signed and push back on their own compromises, so plan in advance. Make sure your own organization is behind you 100% by preparing your internal stakeholders in advance.

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