Win-Win with Chinese Characteristics
The new US administration seemed to score a big coup in Asia last week, when China blocked a fleet of North Korean cargo ships carrying coal to Chinese markets. On the surface, it seemed a perfect win-win for both Washington and Beijing.
It turned out, however, that the Chinese policy had already been in place since mid February – in response to UN pressure after the earlier round of Pyongyang missile tests. It’s still a powerful win-win deal, but now with Chinese characteristics: Beijing wins when they agree to the policy, and Beijing wins again when they implement.
3 Takeaways from the Case of the Vanishing Coal Ships
1) It’s the implementation, stupid. Chinese like to have parties and press events around the signing of a big document – but for international partners, the real time to celebrate is when the implementation starts. Beijing had already decided to refuse NK coal back in Feb, but implementation now seems to be part of a “welcome to the new job” gift basket for the US President. Don’t worry, though. China got a lot in return. Expect to hear much less about currency manipulation in the future, and charges about dumping may quiet down for a time (though they’ll be back).
2) Chinese think they can get you to pay for things they already wanted to do anyway. It works. Usually NK is a big headache for Beijing, but now Washington is paying them to be part of the solution. This same scenario plays out all the time in business. You look to your Chinese partners to provide a solution to a specific business problem, and end up investing in their plant and/or training their people. In the 90s & 00s, Chinese factories wanted to climb the tech ladder and improve quality, so they allowed Western engineers to educate Chinese technical teams. Now Chinese firms will permit overseas partners to improve branding, customer service, and international management. It will always be YOUR idea to help them reach their own strategic goals – and there will always be a way for you to pay for it.
3) Manage the deliverable mismatch. Every time a Westerner comes to China, he or she faces the same dilemma. You need vaguely defined, open-ended strategic help in the long term (developing markets, pacifying super-villains) in exchange for tangible, real concessions right now. You pay, buy, hire, invest, or transfer assets FIRST, and then the other side performs their side of the deal. This creates more risk in China than many western negotiators seem to realize – at first. Once your assets have been transferred, you are in a much weaker position.
We may never know the exact nature of the proposals and concessions that Xi and Trump negotiated, but we do know this much:
Long after the dramatic animations of cargo ships changing direction are forgotten, the CCP negotiators will still be meticulously defending and redefining every point they won in Palm Beach last week.
Written by an American for Westerners negotiating in China, “The Fragile Bridge” dispenses with politically correct euphemisms and ivory tower pseudo-psychology. Knowing which 1,500 year-old philosopher uttered what esoteric phrase won’t help you safeguard your assets or keep your JV operating, but learning from the lessons of dozens of successful Westerners who have survived the China challenge just might.