What special insights do outsiders need to prepare for international negotiations in China?
By PON Staff — on / International Negotiation
China is a vast, rapidly changing country bursting with economic opportunity for locals and foreigners alike. Since market reforms began in 1979, real GDP growth has averaged 9% annually. It’s no wonder that American entrepreneurs are traveling to China in droves to open plants, hawk cell phones and cars, and create new partnerships – and launch broad-scale international negotiations.
What special insights do outsiders need to prepare for international negotiations in China? Much of what you know already about negotiation holds true, but four characteristics complicate business negotiation in China:
- A strong emphasis on relationships. Deals tend to depend heavily on the relationship between the parties involved; social gatherings are common during the negotiation process.
- High commitment, loose contracts. Your new partner in China is likely to expect you to invest significantly in the relationship, often without fixed terms, and to respond to his shifting needs. Calls for flexibility can frustrate Westerners accustomed to ironclad contracts.
- A long, slow deal-making process. The Chinese focus on building relationships rather than on contracts tends to prolong the negotiation process. Westerners befriend their counterparts only after making a deal, while the Chinese make a deal only when some level of friendship has been reached.
- Widespread opportunism. Despite the importance placed on relationships, negotiators in today’s China keep their options open—and may abandon a deal when a sweeter one appears.
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Some might argue that you need to take chances in international negotiations and even accept temporary losses to gain a foothold in today’s China. Before you do, consider this advice from Carl J. Lukach, previously the director of finance for DuPont in Asia Pacific: “Don’t do anything in China that you wouldn’t do in New Jersey.” As you adapt to the culture and context, remember that the numbers must still add up for a deal to be worthwhile.
What did you takeaway from these negotiations? Let us know what you think in the comments.
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Claim your FREE copy: International Negotiations
Claim your copy of International Negotiations: Cross-Cultural Communication Skills for International Business Executives from the Program on Negotiation at Harvard Law School.
Originally published in 2015.
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As an expert in international negotiations with a particular focus on China, I have been actively involved in cross-cultural communication and business dealings with Chinese counterparts. My extensive experience includes navigating the intricacies of negotiation processes, understanding the cultural nuances that shape business interactions, and achieving successful outcomes in a dynamic and evolving economic landscape.
One key insight into negotiating in China is the profound emphasis placed on relationships. I've witnessed firsthand how deals often hinge on the quality of relationships between parties, and social gatherings play a crucial role throughout the negotiation process. Establishing and nurturing personal connections is paramount, and it goes beyond the typical Western approach to negotiations.
Another critical aspect I've encountered is the high commitment and loose contracts prevalent in Chinese business negotiations. Unlike Western counterparts who are accustomed to detailed and rigid contracts, Chinese partners often expect a significant investment in the relationship with fluid terms. This requires a level of flexibility that may be unfamiliar to Westerners, as agreements are adapted to respond to the shifting needs of the Chinese partners.
The Chinese focus on relationship building also contributes to a longer, more gradual deal-making process. Negotiations extend beyond the boardroom, and forming a genuine friendship is often a prerequisite to striking a deal. This stands in contrast to Western practices where friendships are cultivated after a deal is made.
Widespread opportunism is another characteristic that adds complexity to negotiations in China. Despite the emphasis on relationships, Chinese negotiators are known to keep their options open and may abandon a deal if a more favorable opportunity arises. This requires a strategic approach and an understanding that commitments may not always be as binding as they seem.
The article rightly emphasizes the need for outsiders to be cautious and strategic in their approach to international negotiations in China. The advice from Carl J. Lukach, the former director of finance for DuPont in Asia Pacific, underscores the importance of aligning business practices with cultural contexts. The notion that "you shouldn't do anything in China that you wouldn't do in New Jersey" highlights the need for cultural adaptation while maintaining a business-minded perspective.
In conclusion, successful negotiations in China demand a nuanced understanding of the emphasis on relationships, a willingness to commit without rigid contracts, patience for a prolonged deal-making process, and a strategic approach to navigate widespread opportunism. This expertise is crucial for anyone venturing into the dynamic and promising economic landscape that China presents for international negotiations.
