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Americans Negotiating in China, Page 2

China Business Cross-Talk:  Two Views on Doing Business in Today’s China

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Mario Cavolo and Andrew Hupert take two different views on China’s emerging business environment.

China’s economic and regulatory policies are a work in progress that are constantly evolving.  Lately the pendulum seems to be swinging against the interests of multinationals, but the reality defies easy answers or rash generalizations.  ChinaSolved.com presents for your consideration two different views on recent developments and future directions of Chinese economic policy:

China’s Evolving Business Environment Favorable to Some

Mario Cavolo, Vice President – Media/PR Training; Scott PR China, www.scottpr.cn and author of China: The Big Lie? published by Long River Press, North America

Mario Cavolo reminds us that not all the China business changes are negative – and some beneficiaries of recent policies are the good guys.

Any worthy China watcher has noticed the increasingly unfavorable trend toward foreign entities present here, whether it is reporting on security issues with Microsoft and Apple or the recent position papers by the European and American Chambers delivering a somber rather than upbeat view of the current business environment in terms of ease of doing business. It’s not all bad, but we wish it was better.

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Is it Still Worth it to do Business in China?   Part 4: Different Earnings Models, Different Bureaucratic Challenges

The Chinese bureaucracy is much more tolerant of overseas companies that spend than of overseas companies that earn in China.  That means integrated MNCs must adjust their business models – and their approach to regulators – when they are selling.

Western negotiators in China are finally coming to accept

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that no matter what the deal on the table may be, their most significant counterparty is the Chinese government bureaucracy.  The Chinese government has a much different attitude towards international businesses coming to China to buy or manufacture as opposed to those coming to China to sell and market.  International managers are still coming to grips with this dichotomy, and it is causing problems and costing money.

Ask not what China can do for you – ask what China wants from you.

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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.

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Has China Inc. Been Overplaying Its Hand?

May has been another tough month for international negotiators doing business in China.

The indictment of 5 alleged cyber spies form the PLA threatened to bring US-China relations to a

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new low.  Meanwhile, territorial disputes escalated between China and the Philippines, Viet Nam and Japan threatened to spin out of control with disturbing regularity.  That’s why there was so much headline space (though not all of it on the front page) devoted to a high profile energy deal between China and “Reliable Friend’ Russia.  What does all of this mean for Western negotiators in China?

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MicroSoft in China – Massive Schlimazel

Miscrosoft 8 Banned from Government Computers in a Surprise Announcement

According to every Yiddish speaking grandmother in the world, there are two kinds of fools  – schlemiels and schlimazels   The schlemiel walks into a busy restaurant and bangs smack into a waiter carrying a tray of hot soup, dumping it all onto a customer sitting nearby.  The schlimazel is the guy that gets dumped on.

10 China Negotiating Mistakes - Buy the eBook on Kindle
Mistake #4: Losing control of the agenda. Mistake #5: Training your own competition. Mistake #10 : Forgetting that it’s only guanxi until you get caught

Bill Gates of Microsoft is the schlimazel.

(Reuters) – China has banned government use of Windows 8, Microsoft Corp’s latest operating system, a blow to a U.S. technology company that has long struggled with sales in the country. http://www.reuters.com/article/2014/05/20/us-microsoft-china-idUSBREA4J07Q20140520

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Negotiating with (Reluctantly) First-World Chinese Managers (Part 2)

How to do business with Chinese managers who are still in denial about their changing role in the world.

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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.

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A Cautionary Tale of Two Parties — Confirmation Bias in Your China Operation

Tea Party and the Communist Party rhetoric intersect in some strange and potentially dangerous ways.

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Today’s Chicago Tribune carries and excerpt from former Sec of Treasury Tim Geithner’s memoir where he criticizes  “Sen. Mark Kirk of Illinois for ‘delusional’ fears when Kirk purportedly warned officials in China not to buy U.S. Treasury securities or other U.S. debt.”

The story reminded me of a recent encounter I had at prestigious NYC networking event. I was introduced to a young professional woman from Beijing who was hired right out of Columbia Business School by a prominent private banking firm. She was well-educated, well-traveled, and well connected – both in NY and Beijing. I asked about the outlook for inbound Chinese investment into US hi-tech and agri-business industries . She responded with vague anti-government complaints that private investors were willing but Washington was blocking their efforts. For a moment I was hit with that jarring feeling you get when you experience something familiar in an unexpected place – like running into an old acquaintance while travelling in a strange city.

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Why it’s not OK to have never heard of Alibaba.

Lack of basic business intelligence is the #1 risk facing Western negotiators in China.

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Alibaba is grabbing headlines again for breaking new ground – again.  This week it’s a record setting IPO in NY (bigger than Facebook) — though it’s newly announced deal with ShopRunner may turn out to be even more significant in the medium-term.

Just to restate the obvious, Alibaba is already involved in a very large equity cross-holding deal with Yahoo and one of their major investors is Softbank.   The company has been around for 15 years, and for most of that time their iconic founder Jack Ma has been shuttling around the world, raising funds, making deals, and speaking at international A-list conferences.  Alibaba started out as an international B2B platform whose raison d’etre was to match Chinese sellers with international buyers.  Nowadays it is China’s most distinctive brand, responsible for selling or moving roughly half of every online transaction in China (which the World Bank just ranked as the world’s largest economy).

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We Are Not #1 !

Experienced China negotiators know why China doesn’t want the title: World’s Biggest Economy.

China is trying its best to avoid the glare of international scrutiny again – but this time it’s not about censorship, corruption, or human rights. The World Bank is trying to hang the mantle of “world’s largest economy” on China’s brawny shoulders – and Beijing is having none of it.

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Regular readers of ChinaSolved are familiar with the successful Chinese negotiating tactic of BoPS  – or Balance of Power Shift. Chinese negotiators frequently enter a deal situation by purposely placing themselves in a subordinate position. They are known for their humility, cordiality, and polite flattery – “your company is so accomplished, your technology so advanced, your brand so famous.” You aren’t treated as an equal partner — you are “LaoShi”, the honored teacher who leads and offers guidance. Before you know it, you have guided your polite new junior partners right to your best technology, your proprietary business methods, and maybe even your customer lists. That’s when the balance of power shifts and suddenly your humble Chinese counterpart becomes a good deal more assertive. Once a Western negotiator has outlived his usefulness, the partnership either dissolves completely or becomes much more competitive in nature.

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Do Not Build Your China Business on a Weak Foundation

An excerpt from the new China Solved eBook & online course: “10 Common China Negotiating Mistakes

If you are going to China to negotiate a deal, then you occupy three distinct roles.

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Learn from the expensive mistakes of expat negotiators who have come before you…
  • First, you are the point man on the field that must represent the home office and execute in its best interests.
  • Second, you are responsible for gathering pertinent information and moving it through your organization to maximum advantage. This involves a great deal of internal negotiation, which must be done well before you start negotiating in China. If you try to start changing your firm’s global policy, or acting on emerging opportunities (or newly discovered dangers) without first doing the necessary groundwork, you are going to face bottlenecks, conflicts, and unpredictable outcomes.
  • Third, you are the relationship builder. This is a delicate role under the best of circumstances and it is particularly challenging if someone back in HQ thinks that he has already established all the key personal relationships when he banqueted his way through Shanghai 18 months ago. If you are running point, you have to make sure everyone on your team—from the big bosses back home to the local staff supporting you—are all working off the same playbook.

HQ Bosses — Same Goals, Different Methods

If, on the other hand, you’re a top-down senior strategist based in HQ then you have to understand the mechanics of business in China. China deals terms are never “set and forget”—you cannot use US or European operating systems as a template for a new China business. We admire those senior managers who set bold strategies for entering the China market, just so long as they remember that for every self-congratulatory press release there will be 10,000 ground-level micro-decisions that must be executed properly. If you aren’t actively supporting your own people in the field then you are undermining them, and yourself.

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