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China economy

Negotiating in a Slowing China

Will weaker Chinese growth strengthen your negotiating position?

10 China Negotiating Mistakes - Buy the eBook on Kindle
Learn from the expensive mistakes of expats who have come before you.

The Chinese economy has been slowing for the last few quarters, and whether it is a controlled application of bureaucratic brakes or the start of a skid into a recessionary ditch, some international business people see China’s deceleration as an opportunity.  International negotiators who believe that a slowing Chinese economy gives foreigners more leverage are, however, over-optimistic at best.  There may be isolated cases were individual private Chinese businesses will be motivated to sweeten their offers in the face of a domestic slowdown, but it would be unwise to assume that  Chinese counterparties are all feeling desperate.  Westerners who calculate that the bureaucracy is going to become more welcoming to foreign businesses need to realize that a couple of years of slower growth will probably make their challenges in Beijing more severe.

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Is it Still Worth it to do Business in China?   Part 3:  Myths about the New China Economy

China bears and the Chinapologists are spreading myths that lead to terrible business decisions. The truth lies somewhere between these two extreme – and dangerous viewpoints.

The Fragile Bridge
The Fragile Bridge: Conflict Management in Chinese Business

Last week we talked about China realities.  The ultimate conclusion was that while the Chinese business environment isn’t fair, it’s still the best game in town in terms of growth and opportunity.  As a China negotiator and decision-maker, you have to decide early – go all in or get completely out for good.  China is a terrible place for half-measures.

Two types of China myths.  China bear and Chinapologists.

Chinapologists are the China experts who support and spread the orthodox China party line.  You can usually spot them because they tend to preface every statement with, “I’m not supporting the Chinese party line but…” and then they proceed to do so.  When a Chinese person does this it’s pretty easy to spot them as either 50 Cent Army (paid posters on online chat and BBS sites, who are alleged paid half a mao – or fifty cents – for each pro-government entry) or direct beneficiaries of Chinese policy.  It has become common for Westerners living in China for a long time or hoping to curry favor with bureaucrats or officials to actively defend Chinese policies that many Westerners consider unfair or discriminatory.    Sometimes these Chinapologists feel they are winning points with decision-makers who will soon repay the favor; sometimes they got to this position via a slippery slope of defending elements of Chinese business or society that they genuinely believe in- but ended up completely in the China camp; and sometimes they are merely mouthing politically correct positions in public while take a much more realistic stance in private or with paying customers.  However they may have come to act as apologists for the Chinese bureaucracy, their arguments usually fall into one of three main categories:

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China’s First World Problems – and the International Negotiator (Part 1)

Doing business with China as an emerged market

10 China Negotiating Mistakes - Buy the eBook on Kindle

This month China had to finally put aside its own closely held claims that it is an emerging market. Since Deng Xiaoping steered the country onto the road of “free market with Chinese Characteristics” in 1978, Chinese leaders and economists have characterized the PRC as a developing nation that deserved special treatment. Beijing’s “soft power” foreign policy hearkened back to the  non-aligned movement of the Cold War, always stressing that China was – at heart – still a peace-loving revolutionary “down with the struggle” of oppressed nations everywhere. The steady drumbeat of Chinese propagandists and negotiators alike was that China was big, poor, and struggling – and should not be judged by the pockets of wealth in a few coastal cities.

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Are International Managers in China Ready for the New Middle Class?

The service sector is the key to understanding the New Chinese Consumption Model

On Tues I attended a panel discussion at the Asia Society in NY  titled Doing Business in Asia: 2014 and Beyond where five experts shared their thoughts on direction of the business environment in Learn to negotiate in China with China SooveAsia. You can get details and see a webcast here. The 5 experts, including Quartz’s Gwynn Guilford and the Harvard Kennedy School’s Edward Cunningham  laid out their views on the future of Asia with a focus on China.

The five big takeaways:

1. The big story is the growth of the middle class – carrying with it the promise of new prosperity and the threat of greater environmental strains.
2. GDP in China will fall significantly. Although admittedly not economic experts, the panel mostly predicted that China’s economic growth would be somewhere around 5% YOY in the near future — or roughly 30% off official projections. China is shifting from an investment based to consumption based economic model.
3. Pollution will continue to be a major problem.
4. The demand for new health care is rising dramatically.
5. Chinese industry is becoming less competitive as wages rise and the cost of inputs continues to trend upwards. The new middle class is going to be big users and providers of services.

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The ChinaSolved Newsreader List

Here is the list of sources I load into my China newsreader (I have used ever since Google cut their G-Reader).  I’m shooting for a comprehensive list of business sources that are good for a daily 15 – 30 minute scan.  If I’ve overlooked any, please let me know:

China Business Intelligence Sources Basic (news, finance & business)

ChinaSolved Blog

Want China Times  (Knowing China through Taiwan)


China Business Review  (The US-China Business Council)

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ChinaSolved International Negotiators’ Guide to China 2014.

The trade relationship will grow incrementally more challenging and MNCs may finally air their grievances in public.

2014 will be challenging for international negotiators in China, but not particularly unstable or erratic. An unsettled economy in China will bring out protectionist impulses in Beijing Sign up for the ChinaSolved newsletterbureaucrats, who will be increasingly defensive and conservative about what happens within their borders while at the same time becoming more ambitious and assertive in their dealings abroad.

Access to the the Chinese market will become a touchier issue for deep-pocketed MNCs, who will exhibit a greater willingness to go public with their complaints about market access to China — and may even mobilize connections at home to limit Chinese access to western markets. China in 2014 will continue its trend of greater nationalism, protectionism and defensiveness, but shouldn’t hold too many surprises for experienced international businesses. Savvy negotiators will find ways to turn bureaucratic heavy-handedness to their own advantage by offering Chinese partners help moving offshore to more attractive, less restricted markets.

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In China – The Media is the (Financial) Message

Bloomberg and NY Times have become the China Business Headline

We Westerners all love our freedom of speech and an independent, unfettered 4th estate — but Sign up for the ChinaSolved newsletterthe visa situation for western reporters from the New York Times and Bloomberg still waiting for residency visas to remain in China  has much deeper implications for international managers.  Beijing and the CCP view press freedom as a matter of privacy and sovereignty.  US Vice President Joe Biden  recently registered the Western view that a free press is vital to a healthy economy and society.  But this goes far beyond a clash of cultures.  This time, it’s commercial.

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3rd Plenum Wish List – and Won’t List

No news will be the best news for international managers in China

Even optimistic predictions about the upcoming 3rd Plenum are pretty downbeat for the Sign up for the ChinaSolved newsletterforeign business community – which has not been enjoying Xi JinPing’s administration as much as they had hoped.  Headlines about scandals, corruption charges and villifications by the official press have been bad news for individual MNCs like Starbucks and GlaxoSmithKline.   Worse news lurks beneath the surface in a series of trends that have the potential to tip the financial balance against a China investment.   Regulatory mechanisms that are unfair and worse – unpredictable, visa policy that is restrictive and cumbersome, inflation, hyper-competition and HR bottlenecks are the biggest complaints.

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USCBC 2013 China Business Survey – The Verdict is “Tempered Optimism”

International managers must learn to deal with a more mature, independent Chinese economy – and that won’t be easy.

USCBC 2013 China Business Environment Survey Results:
Tempered Optimism Continues Amid Moderating
Growth, Rising Costs, and Persistent Market Barriers

Sign up for the ChinaSolved newsletterThe US China Business Council has published its annual “China Business Environment Survey” results, and it is a mixed bag for international managers in China. The Council keeps using the phrase “tempered optimism”- but that seems to be a euphemism for “new reality that Westerners must deal with.”

The Council puts on a brave face and mines the data for bits of good news, but the upshot is that the problems facing international managers in China are A) daunting and B) not going away any time soon.

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Taiwanese and Chinese Negotiating Tactics Compared

Taiwan and China welcome foreign negotiators the same way – but say goodbye differently.

Sign up for the ChinaSolved newsletterI was recently asked by a member of the ChinaSolved Linkedin group  if there was difference between the way Chinese and Taiwanese negotiators behaved. It’s a great question that comes up often, but seems particularly appropriate now.

The bottom line is that negotiations with Taiwanese and Chinese counter-parties start out the same, but end up in different places. Westerners can be successful in both cases – but have to understand how negotiators from Taiwan and mainland China think about VALUE.

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