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Andrew Hupert

3 Negotiating Takeaways from the NK Coal Boat Maneuver

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.

North Korea Coal BoatsIt 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.  

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Three Negotiating Issues to Watch at the Xi Trump Meeting

The upcoming Xi – Trump meeting is the first face-to-face sit down between the two leaders.  The US side has been clear about what it wants from China, but it’s not quite as clear what it plans on offering.  Don’t get distracted by the background noise like Tillerson’s visit  or uninformed “princeling” gossip.  This is all about the relationship between 2 leaders.

Every negotiation is a competition between two narratives

The Trump story is entitled “Make America Great Again” – but the plot is a muddle of victimhood (China is bullying America) and bravado (unilateral action on North Korea).  Xi Jinping’s narrative is “The Chinese Dream” which juxtaposes a need for global respect with insistence on non-confrontation – all wrapped around one of the largest projections of power since the early Ming (OBOR, 9 Dash Line).

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The Future of US-China Commercial Relations: Welcome to the Multiconomy

Takeaway – Established Western brands will continue to defend their global leadership positions for a while yet, but Chinese corporates are taking control of growing niches and new categories. Look for Chinese entities to disrupt industries through enforced localization and substitution – not head-to-head competition.

multiverse 2

Welcome to the Multiconomy

Phase 1: Frenemies on a Glass Bridge

The status quo of US – China commerce can best be described as frenemies who need each other more than they like each other.  Up until now, both Chinese and Western commercial systems have been multi-faceted and opportunistic. National policies have been one of many inputs in business decision-making.

US China Relations are like a glass bridgeThis situation can be characterized as brittle, but not necessarily fragile. Think of our existing system as a strong glass bridge. It’s very stable – right up until the moment it starts to crack. Then it can no longer support its own weight, but is very difficult to repair.

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5 Negotiating Lessons from Sec. of State Tillerson’s Beijing Trip

That treacherous opening Chinese toast.

US Secretary of State Rex Tillerson made his first official visit to China last weekend, and the White House probably sees it as one of the bright spots in a rocky transition. His Beijing hosts, however, will view the meet as a major step towards their goal of regional hegemony and global respect. Like many western execs before him, Sec. Tillerson doesn’t seem to understand what the Chinese believe he’s agreed to.

This was how the new Sec of State described the US China relationship in January:

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The New CEO in Asia

We’ve seen this before. A new CEO with limited China experience introduces himself to the international business community with tough

China policy can leave you between a rock and a hard place
China policy can leave you between a rock and a hard place.

talk and big promises about China and the rest of Asia. Then reality rears its ugly head.

The new US administration is doing what new US senior managers in China do best – sending conflicting messages, missing opportunities, and making sweeping pronouncements that are just about impossible to implement.

What can we expect moving forward?  

Expect to watch the needle swing back and forth between Partner and Competitor pretty sharply for a while yet as the new trade bosses find their footing. Here are the potential flashpoints you should be watching.

  • china businessman stressed outSouth China Seas Dumping Currency North Korea Iran Cyber spying Intellectual property protection Tariffs or “border adjustments” Christianity in China Taiwan

    Yes, the Taiwan card has been played, but you can expect to see it massively overplayed at least once again in the near future. The present administration has probably forgotten the Taiwan call & tweet , and is hoping that the tough talk on North Korea will amount to little more than a photo-op. And that’s your problem(s).

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Last Man Standing Part 3: POV Counts.

POV counts. Chinese have opinions too.

In US China negotiation, POV changes everything.
POV changes everything in negotiation

Some westerners are pushing back against the idea that we are facing the risk of rising trade barriers or a breakdown in orderly trade regimes. Their logic is that, “The US has a lot of levers, and we can assert our rights without necessarily sparking a trade war that the Trump Administration doesn’t want.” Not wrong, but it makes the dangerous assumption that trade relations are going to be something Washington stays in control of.

Trade frictions almost always take on a life of their own due to a single inconvenient point: Both sides in a dispute get an opinion. If you don’t know the other guy’s point of view (POV) then you have absolutely no control over the final result.

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Last Man Standing: China as Global Leader

Takeaway: As the US rapidly disqualifies itself from global leadership, China will find itself shoved into a role it doesn’t want it and isn’t ready for. We will almost certainly see a more China-centric world. Here’s what it may look like.  

What a difference a week makes. In my last article I spoke about 3 big issues China would face if it tried to step into the position of global leader.   In just a matter of days, however, the new US administration not only allowed it to happen, but seemed to be have been actively

Chuang Tzu and the Turtle
      Chuang Tzu tried to warn you

pushing the PRC into that role.

China went from the scrappy challenger who looked like a long-shot for the title to the last man standing in a remarkably short period of time. They’ve emerged as the odds on favorite by default.  The US has taken itself out of the global leadership game.  Europe looks fragmented and weak — and may very well end up following the US into isolationism. Russia is a military force. China is the last man standing and leads by default.

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Is China ready for the global BIG Time?

Before China can step up to global leadership it needs to address 3 BIG challenges:  Branding, Innovation, and Globalization.  It’s just not there yet.

The Trump inauguration and British exit from the EU may very well usher in a new era of isolationism. Every 10 years or so, pundits like to ask if it is China’s turn to step up to take center stage in global politics.   Even China’s foreign ministry has said it will reluctantly step up – if it was necessary. The truth, however is that whatever the external situation might be, China simply has a set of BIG problems that will contain China to a regional power for the time being.

China map - doing business in a regional power
Still Regional, after all of these years

 Branding

 Innovation

Globalization

Branding:

Still all Party. Chinese corporate branding tends to be very vague (at least by international standards) or very “talking head” (think Alibaba’s Jack Ma or Wanda’s Wang Lianjin). It’s very hard to separate the image of China brands from the CCP itself, and that’s a problem that isn’t going away. Global brands like Apple, Disney, Mercedes, and L’Oreal have their own identity – so they can manage their international image at will. You have your own view about Google or BMW. You can make it personal. China Inc. simply doesn’t work as a consumer brand, and even the few Chinese privates with global heft don’t have much identity apart from their owners or the Party.   (For a detailed examination of Chinese branding download BrandZ’s Chinese Global Brand Builders )

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People’s Daily & XinHua: Required Reading for International Business

China Negotiation Pro Tip: Start Reading the Chinese People’s Daily. The news is fake, but the sentiment is real.

Takeaway: The People’s Daily and other Xinhua-driven official news outlets offer Western decision-makers valuable insights into 1) CCP official policy and 2) Street level sentiment of Chinese public.

As we enter a new period of increasing tension and trade barriers, individual decision-makers

China negotiators should read people's daily and xinhua
The news is fake, but the sentiments are real.

will once again have to scramble for real, actionable news about China. I want to point you in an unexpected direction: the Xinhua News Agency / People’s Daily. By now we have all learned about the dangers of filter bubbles and echo chambers (at least that’s what my Facebook feed tells me), so I’m offering up a cheap & easy means of getting direct access to genuine CCP official views.  Here are the links:

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China and the Unpredictable Negotiator

Chinese negotiators tend to shift from guanxi-seeking partner to cut-throat competitor mode when confronted with an unpredictable counter-party.

Chinese negotiations usually follow one of two paths – towards long-term partnership or one-off competition.  What’s the difference?  You are.  If a Chinese counter-party feels that he can do better as a long-term partner, that’s what he’ll go after. If he feels that you won’t honor the terms and obligations of a durable & profitable relationship, he’ll go for your throat.

China and the unpredictable negotiatorChinese institutions are known for their long memories, and well after members of the new administration have forgotten their twitter tirades and decided to “move on and get on with business,” American firms will still face increased scrutiny, hostility, and non-economic barriers.

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