16 Practical Chinese Negotiation Tips and General Strategies (compiled)

GENERAL STRATEGIES AND 16 PRACTICAL TIPS IN THE THREE STAGES OF BEFORE-DURING-AFTER NEGOTIATION IN CHINA
by Vincent F. Yip, PhD MBA, Management Consultant, and Lecturer, Stanford Continuing Studies ( Palo Alto, California)

Note from Foreign Entrepreneurs in China:  I´m planning to share this very good article in some social media forums so this is a compilation of  part I & II that you have probably read in my previous two posts)

For companies in Fortune 500 or even Small and Medium Enterprises, entry into the lucrative China market is a highly desired process that begins with identifying potential Chinese partners and entering into all-important negotiation. Other than generalities such as maintaining “guanxi” and “face”, any western team intending to go into China for business and commercial negotiations should have as many practical tips on the “dos and don’ts” of negotiating in China. I shall be teaching the Stanford Continuing Studies course “Doing Business in China” we will spend half a session on this important issue of negotiation during the six-week duration. This course begins in late June and the description of the course is in this link:

https://continuingstudies.stanford.edu/courses/course.php?cid=20114_BUS+202

Based on this author’s 30 years of experience travelling, living and working inside China, here is a list, not exhaustive by any means, for use in the three stages of before, during, and after the actual negotiations.

(A) PREPARATIONS:
1. Pick a neutral large city & location;
Background Fact: Do not give into pressure to conduct all negotiations in the small city of the Chinese partner, and suggest doing it in a larger international city with modern conveniences and security. There have been cases where the Chinese side can and has resorted to unethical practices to illegally obtain information from you.

2. Do background research on subject and personalities using Chinese sources;
Background Fact: China has no Moody’s, Better Business Bureau or any trustworthy rating agencies on the track record of a company. Best you find several other local Chinese sources to cross check the reputation of your Chinese partner or opponent in negotiation.

3. Pick your own team (age, seniority, sex, attire) carefully. Be consistent from meeting to meeting;
Background Fact: The Chinese prefer to maintain personal relationship from beginning to end, so keep the team intact. Also, youth and women among your team are not frowned upon in today’s China, but make sure your top leader has a title (make up one if needed) that commands respect from their side.

4. Be realistic about your strengths and weaknesses;

5. Bring gifts for your host, bring your own personal effects/medicine;
Background Fact: Most Chinese cities are quite modern and medical facilities are effective and reasonable, but not all your western medicine is readily available.

(B) ACTUAL NEGOTIATIONS:
6. Pick a neutral venue and a convenient time avoiding the eve of long national holidays of both countries, and allow “float” for overflow of schedule or the Chinese may use time pressure against you;
Background Fact: They tend to wait till the last day to raise critical issues and demands, and force you into making concessions because you are pressured to leave.

7. Stay at an international hotel, watch your belongings and intellectual property;

8. Know the wants and needs of your Chinese side, remember Sun Zi’s premier advice of “know yourself and know your enemy, and you will win a hundred battles”.

9. Do not fall prey to food, wine, & women; do not negotiate when tired or pressed;

10. Speak in your native tongue, use your own translator, write it down when it comes to numerals and figures as mistakes are commonly made right here;
Background Fact: Best to hire your own translator/interpreter and when it comes to numerals and magnitudes, insist on writing them down. Because of the difficulty in translating numbers/magnitudes, gross errors can occur even to the best VIP translators and the consequences are horrific of course!

11. Remember such Chinese negotiation tactics as:
– accusing you of violating guiding principles, guilt trip;

– asking for the moon, outrageous demands;

– threatening to go elsewhere for the better offer;

– divide and conquer & outlasting your patience;

12. Remember national and cultural sensitivities, avoid discussions on human rights and Tibet, for example, and always keep face and give face. Jokes seldom work across culture so best not to crack them openly.

(C) POST NEGOTIATION
13. Thank and praise host, take photographs, exchange souvenirs;

14. Redraft final agreement (must be in both languages), check for accuracy, go over details, and always have a scribe/secretary take care of all documents;
Background Fact: Remember that Chinese is a much more flexible and opaque language, but yet the Chinese copy is the one that prevail in their courts. Make sure then those details you had written down in the English version is correctly reflected in the Chinese version, and submit Appendices if needed.

15. Win or lose, happy or not, a farewell banquet (speeches, toasts and gifts exchanged) is definitely required;

16. A contract is valid only if it continues to be serviced, it is only the beginning of a difficult long road towards a successful project.

General Strategies
Many often ask if it is useful to study Mandarin and the Chinese language before going and my answer is normally to persuade them to instead spend their valuable time reading up on China’s history, culture and psyche. One of the most successful China experts is Dr. Kissinger, the legendary diplomat who helped open up US-China relationship in 1972, and he is not known to speak any Chinese. It is much more important to understand what drives the Chinese, their fears, concerns, and wants and needs, and China’s own “pride and prejudice”.

In general, some knowledge of Confucius teachings that are the underpinning of Chinese culture is certainly useful before hopping on the plane to China. But I would definitely recommend spending a week or two to browse through articles and business/military books on the famous Sun Zi “The Art of War”, as many of its strategies and tactics will surface during the long course of negotiations with the Chinese side.

Here is a parting comment that may surprise you. In the west, wars and military efforts are about display of bravery and valor, but Sun Zi said a successful militarist is never short of treachery and cunningness! Then there is also the Chinese saying that “the business field is just like a battle field”, now combine the two saying and you know why negotiation in China is not for the faint-hearted and unprepared!

By Vincent F. Yip, PhD MBA
Management Consultant,
and Lecturer, Stanford Continuing Studies
Palo Alto, California
Email: vyip101@hotmail.com
Cell: 415-860-0660

What do you think?

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16 Practical Chinese Negotiation Tips and General Strategies (Part II)

GENERAL STRATEGIES AND 16 PRACTICAL TIPS IN THE THREE STAGES OF BEFORE-DURING-AFTER NEGOTIATION IN CHINA
by Vincent F. Yip, PhD MBA, Management Consultant, and Lecturer, Stanford Continuing Studies ( Palo Alto, California)

This is the second part of guest post by Mr Vincent F. Yip. You may read the first part here.
Remember that he will be teaching the Stanford Continuing Studies course “Doing Business in China”.  This course begins in late June and the description of the course is in this link:
https://continuingstudies.stanford.edu/courses/course.php?cid=20114_BUS+202

 16 Practical Chinese Negotiation Tips and General Strategies (Part II)

(C) POST NEGOTIATION

13. Thank and praise host, take photographs, exchange souvenirs;

14. Redraft final agreement (must be in both languages), check for accuracy, go over details, and always have a scribe/secretary take care of all documents;
Background Fact: Remember that Chinese is a much more flexible and opaque language, but yet the Chinese copy is the one that prevail in their courts. Make sure then those details you had written down in the English version is correctly reflected in the Chinese version, and submit Appendices if needed.

15. Win or lose, happy or not, a farewell banquet (speeches, toasts and gifts exchanged) is definitely required;

16. A contract is valid only if it continues to be serviced, it is only the beginning of a difficult long road towards a successful project.

General Strategies
Many often ask if it is useful to study Mandarin and the Chinese language before going and my answer is normally to persuade them to instead spend their valuable time reading up on China’s history, culture and psyche. One of the most successful China experts is Dr. Kissinger, the legendary diplomat who helped open up US-China relationship in 1972, and he is not known to speak any Chinese. It is much more important to understand what drives the Chinese, their fears, concerns, and wants and needs, and China’s own “pride and prejudice”.

In general, some knowledge of Confucius teachings that are the underpinning of Chinese culture is certainly useful before hopping on the plane to China. But I would definitely recommend spending a week or two to browse through articles and business/military books on the famous Sun Zi “The Art of War”, as many of its strategies and tactics will surface during the long course of negotiations with the Chinese side.

Here is a parting comment that may surprise you. In the west, wars and military efforts are about display of bravery and valor, but Sun Zi said a successful militarist is never short of treachery and cunningness! Then there is also the Chinese saying that “the business field is just like a battle field”, now combine the two saying and you know why negotiation in China is not for the faint-hearted and unprepared!

By Vincent F. Yip, PhD MBA
Management Consultant,
and Lecturer, Stanford Continuing Studies
Palo Alto, California
Email: vyip101@hotmail.com
Cell: 415-860-0660

What do you think?

Subscribe to this blog:


 

16 Practical Chinese Negotiation Tips and General Strategies (Part I)

GENERAL STRATEGIES AND 16 PRACTICAL TIPS IN THE THREE STAGES OF BEFORE-DURING-AFTER NEGOTIATION IN CHINA
by Vincent F. Yip, PhD MBA, Management Consultant, and Lecturer, Stanford Continuing Studies ( Palo Alto, California)

For companies in Fortune 500 or even Small and Medium Enterprises, entry into the lucrative China market is a highly desired process that begins with identifying potential Chinese partners and entering into all-important negotiation. Other than generalities such as maintaining “guanxi” and “face”, any western team intending to go into China for business and commercial negotiations should have as many practical tips on the “dos and don’ts” of negotiating in China. I shall be teaching the Stanford Continuing Studies course “Doing Business in China” we will spend half a session on this important issue of negotiation during the six-week duration. This course begins in late June and the description of the course is in this link:

https://continuingstudies.stanford.edu/courses/course.php?cid=20114_BUS+202

Based on this author’s 30 years of experience travelling, living and working inside China, here is a list, not exhaustive by any means, for use in the three stages of before, during, and after the actual negotiations.

(A) PREPARATIONS:
1. Pick a neutral large city & location;
Background Fact: Do not give into pressure to conduct all negotiations in the small city of the Chinese partner, and suggest doing it in a larger international city with modern conveniences and security. There have been cases where the Chinese side can and has resorted to unethical practices to illegally obtain information from you.

2. Do background research on subject and personalities using Chinese sources;
Background Fact: China has no Moody’s, Better Business Bureau or any trustworthy rating agencies on the track record of a company. Best you find several other local Chinese sources to cross check the reputation of your Chinese partner or opponent in negotiation.

3. Pick your own team (age, seniority, sex, attire) carefully. Be consistent from meeting to meeting;
Background Fact: The Chinese prefer to maintain personal relationship from beginning to end, so keep the team intact. Also, youth and women among your team are not frowned upon in today’s China, but make sure your top leader has a title (make up one if needed) that commands respect from their side.

4. Be realistic about your strengths and weaknesses;

5. Bring gifts for your host, bring your own personal effects/medicine;
Background Fact: Most Chinese cities are quite modern and medical facilities are effective and reasonable, but not all your western medicine is readily available.

(B) ACTUAL NEGOTIATIONS:
6. Pick a neutral venue and a convenient time avoiding the eve of long national holidays of both countries, and allow “float” for overflow of schedule or the Chinese may use time pressure against you;
Background Fact: They tend to wait till the last day to raise critical issues and demands, and force you into making concessions because you are pressured to leave.

7. Stay at an international hotel, watch your belongings and intellectual property;

8. Know the wants and needs of your Chinese side, remember Sun Zi’s premier advice of “know yourself and know your enemy, and you will win a hundred battles”.

9. Do not fall prey to food, wine, & women; do not negotiate when tired or pressed;

10. Speak in your native tongue, use your own translator, write it down when it comes to numerals and figures as mistakes are commonly made right here;
Background Fact: Best to hire your own translator/interpreter and when it comes to numerals and magnitudes, insist on writing them down. Because of the difficulty in translating numbers/magnitudes, gross errors can occur even to the best VIP translators and the consequences are horrific of course!

11. Remember such Chinese negotiation tactics as:
– accusing you of violating guiding principles, guilt trip;

– asking for the moon, outrageous demands;

– threatening to go elsewhere for the better offer;

– divide and conquer & outlasting your patience;

12. Remember national and cultural sensitivities, avoid discussions on human rights and Tibet, for example, and always keep face and give face. Jokes seldom work across culture so best not to crack them openly.

Coming soon, post negotiation tips and general strategies.

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China 101: Chinese Negotiation. 10 Top Tips for Chinese Negotiation (part II).

This is the second part of the article by guest contributor and Chinese negotiation expert Andrew Hupert. You may read the first part here.

10 Top Tips for Chinese Negotiation (Part II- tips 6 to 10)

6.  Have a strategy for getting information.
In Chinese negotiation, it is more important that you know the right questions than the right answers.  You have to know enough to assess his proposal and solution.  Western partners have a terrible habit of relying on their Chinese partner to keep them supplied with basic information about markets and regulations.  Plenty of great sources of information and knowledgeable contacts are available – make use of them.  Depending on a counter-party to keep you informed and up-to-date is suicidal.

7.  Beware the balance of power shift.
Chinese partners are known for purposely appearing weak and non-threatening at the start of a deal and manipulating the Western partner into injecting valuable assets or teaching vital information.  Once the Chinese side closes the gap, you can expect their negotiating style to become much more aggressive and demanding.  Guanxi relationships are a function of utility value, and once they no longer need you then they are going to squeeze you.

8.  Have a strategy for adding value.
They have to need you more than you need them.  Their learning curve will flatten much earlier than yours.  Once they understand your technology and your procedures, they will feel they no longer need you.  If you are dead weight, then it is worth it to them to get rid of you.  Know what your Chinese partner can’t do, and then make it central to your partnership.  Innovation, branding, new product development, and overseas sales are examples that have worked for Western partners in the past.

9.  Pick the right partner before you start negotiating.
Know what your strategic and operational gaps are, and then conduct a methodical search for a Chinese counterparty who can close the gap. Novices often find China overwhelming and tend to start negotiating with the first Chinese person they meet.  Most of the time the Westerner ends up giving away his business strategy and marketing plan to a potential competitor, without getting anything in return.  Know what you want from a local partner, and keep screening until you find an appropriate candidate.

10.  Trust with vigilance.
It’s possible to find Chinese partners who are honest and loyal, but your chances improve if they need you more than you need them.  Trusting the wrong person in China is fatal -but being too suspicious and controlling will alienate potentially valuable partners, staffers, and colleagues.  The Chinese side has to feel vested in the profitability of the enterprise, and see a clear path to their own success.  Striking the right balance between common-sense skepticism and healthy confidence in a colleague is a real challenge, but it often is the most significant factor to your success in China.

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China 101: Chinese Negotiation. 10 Top Tips for Chinese Negotiation (part I).

This article on “Chinese Negotiation” is part of the China 101 project. I would like to thank Andrew Hupert who has kindly accepted my invitation to join this project and has shared with us his best advice on the topic.
Andrew Hupert has spent the last 9 years as a corporate trainer, writer, and lecturer in Shanghai, working with both local and multinational businesses.  His professional work has focused on improving the deal-making and negotiating skills of both local and multinational corporations.

Andrew publishes several websites and weblogs concerned with international management and cross-cultural negotiation involving China:
ChinaSolved.com addresses management issues for international managers already engaged in running a China-based operation.
ChineseNegotiation.com focuses on China-US negotiating issues.
He has also published articles in business journals such as Shanghai Business Review and the China Economic Review.  He has recently published his first book – Guanxi for the Busy American.

China 101: Chinese Negotiation. 10 Top Tips for Chinese Negotiation.

Negotiating in China isn’t a special niche for an elite group of international lawyers and diplomats any more.  China is the second largest economy in the world and is becoming a vital counterparty for many individuals and businesses that have never done cross-border deals before. If you haven’t done business with a counterparty from China yet, then it is probably only a matter of time before you or someone in your organization does.  Plenty of Westerners have had great success in China, but it requires preparation and a little research.

Chinese negotiators have an undeserved reputation for being difficult, enigmatic, and unpredictable.  They simplyhave their own approach to business.  Since the global financial crisis of 2008, however, Chinese dealmakers are more confident and secure in their own methods.  Westerners who expect Chinese negotiators to accommodate American or European notions of best practices are setting themselves up for failure.  Chinese negotiators aren’t about to abandon traditional methods like relationship-building and guanxi that have been successful for them, especially since Western standard operating procedure has been looking so shaky over the last few years.  When you negotiate in China, you are in their house – and if you don’t understand the local rules then it is your problem, not theirs.

Here are ten tips that will help Western negotiators be more successful in China.

1.  Don’t disregard guanxi.
Chinese negotiators don’t have to like you, but they have to feel that they know you and understand how you’ll behave as a partner.  In the West, successful transactions lead to relationships – in China, successful relationships lead to transactions.  You have to understand the difference.  Relationship-building rituals like banquets and boardroom meetings where you are introduced to the entire management hierarchy aren’t a prelude to serious negotiating — they are the negotiation.

2.  Guanxi and relationship-building are the traditional Chinese version of due diligence.
They care more about the kind of person you are than the assets your company controls.  Show them who you are if you want to move forward.  While it’s true that Chinese negotiators don’t like to settle details right away, they are still “on the job” during the social meetings and banquets.  To the Chinese side, understanding your character, business philosophy, risk tolerance, and commitment to China determines what kind of partner you are going to be.  If you are evasive, uncomfortable, or withholding during the initial meetings, they may consider you to be dishonest or untrustworthy.

3.  Chinese negotiations don’t end.
The Chinese side feels that they aren’t supposed to.   Westerners believe that a signed contract regulates the partnership, but Chinese feel that an understanding between honest people is the only true constant in an otherwise unpredictable business world. Traditional Chinese negotiators don’t draw a sharp distinction between relationship and negotiation, so as long as the relationship is intact then deal terms are in play.   They feel that environmental shifts and changes in relative circumstances are valid reasons for renegotiation.Plan for the post-contract negotiation in advance, because it is most certainly going to occur.

4.  They will make a play for your IP. 
Technology, processes, and know-how are considered private property in the West, but many Chinese still consider them to be intangibles that are up for grabs.  Saying they can’t have something only makes it more desirable.  Don’t expect to collect rent on last-year’s innovations.  Chinese only pay for technology once (if at all).  The best way to handle software and technology sales is to start planning significant upgrades early.  Apple keeps partners honest and stays profitable in China by perpetually selling the next version.

5.  The same people who can open doors can shut them and lock you out.
Don’t assume that you will be running the show.  If your strategy involves relying on local partners, key staff, or powerful connections to keep your business going, you are in a precarious position.  Successful negotiators are constantly building up their network and adding new connections.  Negotiating strength is a function of the size of your contact list.

Coming soon. China 101: Chinese Negotiation (part II)

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Chinese Negotiation: Do not interrupt me! And six reasons why you should not

Image via Wikimedia Commons

A lot of the tips that we share here on how to negotiate effectivelyin China are obviously not China-specific, but well-known negotiation tips or tactics. The reason why I choose to write about them for you is because, in some way, they are specially relevant to the China context.

Do not feel offended if it is not your case, but we have a distinct tendency to interrupt each other when we are negotiating or discussing. This is not only a big mistake but it is also culturally inaproppiate.

This is an anecdote shared by a Western businessman in China on this topic:

Once, while we were on the process of setting up our company, we were waiting at the notary´s office. There was a meeting going on inside and the discussion got quite heated. There was huge shouting coming from the office but there was also one detail that struck me. Not even at the peak of the argument did they interrupt each other. The dynamic was a heated argument in which each party would take turnsto shout and curse at the other, and then stopped and waited for the other part to react in a similar way. I had never witnessed something like that in my life”

So these are six reasons why you should not interrupt your business contact while negotiating:

In general:

1.If you are interrupting, you are not listening. And listening is thekey to effective negotiation.

2.You may prevent the other party from sharing information that may be helpful for you later on in the negotiation

3.It may be perceived as rudeto interrupt somebody who is talking to you

In China, particularly,

4.Chinese are good at listening and they do not interrupt the other negotiatorwhile talking.

5.It does not help you build the relationship, and relationship-building is vital to business success in China.

6.They just can´t understand why you asked a question if you are not going to let them answer.

What is your negotiation experience? Tell us your story!

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 If you are interested on this topic you may also like to read the following posts:

* 36 Tips on How to Deal or Negotiate with your Chinese Suppliers
* Sourcing from China: Who are the Happy Buyers?
* Quality Control. Can you Hear me Loud and Clear?
* 4 Tips to Succeed in Times of Silence