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US-China negotiation

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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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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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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US-China Business Negotiation 2017: Tactical Ambiguity

There is uncertainty in US-China business right now. Whatever your politics, there’s no denying that the business environment is going to shift in unknown and unpredictable ways over the next year or so. Let’s talk about how to make this work for you.

Tactical Ambiguity = Using Uncertainty as a Bargaining Chip

Strategic ambiguity is about long-term planning. Tactical ambiguity means turning an unclear situation into a valuable bargaining chip. Don’t minimize the impact of uncertainty or try to put an optimistic spin on everything. Chinese counter-parties generally fear chaos, and plan for success on global markets. Both of those buttons are lighting up bright red — so this is an opportunity to reframe your negotiations and planning sessions. You know your counter-party’s hopes and fears right now, and your job is to turn that to your advantage.

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Cross-Culture Negotiating Skills: Analyze and Adjust

Successful negotiators have to master two complementary skills – analysis and planning. The trick, however, is that you have to analyze your counter-party, and then adjust your own plans, methods, and behaviors.

Not the Way We’re Wired

Although this sounds simple enough, it is actually counter-intuitive in practice –and quite difficult. When I started my career in finance, one of the first rules I learned was “buy low, sell high”. The next thing I learned was that the vast majority of investors ended up doing just the opposite – buying at the top and selling low out of fear. Negotiators are prone to making the same sort of emotional blunder. Negotiation is a messy, emotional process, and when there is conflict or stress we revert to our base instincts.  We analyze our own agenda and try to adjust our counter-party’s behavior. This is how we humans are wired

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Lessons from the G20 for “Regular” Negotiators

China’s treatment of the U.S. delegation as President Obama arrived at the G20 conference sparked controversy and a firestorm of international criticism. There are some great lessons here for front-line negotiators involved in cross-border deals.

Barack Obama ‘deliberately snubbed’ by Chinese in chaotic arrival at G20 – The Guardian

The US president was denied the usual red carpet welcome and forced to ‘go out of the ass’ of Air Force One, observers say

China chides media’s hype of G20 spat – Global Times

Overblown reports show arrogance: foreign ministry

Lessons from the G20 “tarmac row”

The conflict may or may not have been serious – but it was real. It says a lot about both the US and Chinese cultures. The Chinese infuriated the world with their hostile behavior. (Don’t be politically correct and insist on saying “perceived hostility”. Many people were angered by the way national security adviser Susan Rice was treated on that airport tarmac, and you may have been one of them. Own it.)  We infuriate the Chinese by talking about it publicly.

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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 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

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

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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