China Inc. is getting introspective again. Experienced international negotiators know that Chinese self-perception has two settings: "emperor of the world conquering the barbarians" and "backwards peasant humbly learning from the sophisticated cosmopolitan." Anything in between is just a transition phase.
But as the economy slows and State Organized Enterprises, SOEs, continue to make life hard for private businesses, the mood in China is shifting from predestined victor to cursed victim. Gone is the front-page speculation about China overtaking the US as global economic leader -recent headlines fret over soft vs. hard landing and capital fleeing to Western havens.
1. Chinese negotiators are adept at winning from weakness
Faced with tough times at home and pressure from a US government fired up with election year fury, SOEs and party spokesmen will get angry - but private businesses will play the victim card. Weakness, however, does not mean loss to a Chinese negotiator. In the last post we talked about the risks facing Westerner negotiators who act too tough.
Today we look at the dangers posed by Chinese counterparties who are good at winning from weakness.
2. Warnings and red flags (the caution kind - not the PRC national kind)
Chinese negotiators are at their best when conditions are at their worst. A tried and true tactic is to purposely place themselves in a subordinate position and humbly allow Western experts to fill in blanks of their business plan or international marketing strategy. Tough gritty American managers feel embarrassed for counterparts who confess ignorance or weakness - your impulse will be to help out and offer guidance. Many American and European managers have trained their own competitors this way.
While they are tugging at your heartening they are also loosening your purse-strings.
Guard your IP, product designs, and business processes from deferential "pupils." Chinese make great students - in the classroom - and the meeting room.
A favorite Sun Tzu maxim is to "look weak when you are really strong" and the modern application for Chinese negotiators is to look dumb when they are really too smart for your own good. Be particularly wary when you have to bring in engineers, technicians or other experts to explain how your products or processes work. And yeah - it will be your idea to help out.
Don't be glamoured by flattery, compliments or helplessness. Any tough-guy American manager can handle being called a son of a bitch or told to go to hell without losing his head.
Your kryptonite is being told how smart you are - or how handsome and youthful you are (for all my boomers out there). Flattery is the go-to move for a Chinese negotiator who feels that you are relatively rich but dumb. They are dusting this one off again after a few years in storage.
Flattery - particularly from attractive young women - is how Western negotiators miss details, fail to press their advantage and squander valuable time. Right now you convinced that this won't work on you, but be warned - it's effective.
Lao Tzu foresaw the downfall of many Western negotiators in China in the Tao Te Ching, "The hard and strong will fall; the soft and weak will overcome them", and then again in Verse 78: "The weak can overcome the strong; the supple can overcome the stiff." Be careful out there.
3. Five ways Negotiate to Win with a "Weaker" China
They can win from weakness, so start off by being prepared to not lose. Knowing what to be careful of is great, but negotiating to win in China means leveraging on your strength as well:
1. Play the threat card. Chinese media - both official and popular - are running away with the meme of anti-Chinese regulators out to ruin mainland businessmen and investors. On the other hand, successful Chinese entrepreneurs and owners want to hedge their bets by expanding overseas - and America is one of the top destinations.
This can make you a very valuable partner if you play the angles properly.
Don't deny that America has gone anti-China - talk up the benefits of having a savvy Western partner with a strong network who understands the regulatory landscape.
If this sounds familiar, it's because that's the line Chinese negotiators have been taking for twenty years with Western businesses entering China.
2. You are hot again - but for different reasons. In the early 2000s I saw more copies of the Harvard Business Review in Shanghai than I had in my entire life previous- including my years as an MBA student. I don't know if any of those Chinese commuters or networkers actually read the magazine - but it made them look like they were right on the cutting edge of modern business thought. That stopped being a good look after the financial crisis punched holes in the myth of American management.
Now that China is stumbling and the US is showing signs of life again (fingers crossed), you are looking better. Not great, mind you, but when it comes to branding, product development and international marketing, you are credible again.
Work your resurgent "expert" status - just don't give away the know-how.
3. Don't make the same rock-bottom mistakes again. Don't always negotiate down. The "race to the bottom" in China is over, and Westerners lost. Those who come to China looking for value will find opportunities to build it. Those who come looking for bargains will find cheap, low quality garbage that will undermine brands, destroy opportunity, and end up costing you a fortune in the long term.
Negotiate smarter in China by paying a little more and getting a lot more.
4. This time Chinese counterparties have money. They are a market, investor and client. They have more to offer, and smart negotiators are putting together more complex, multifaceted deals. Start looking at deals that involve multiple markets for different ranges of products and end users.
5. The pendulum will swing back. China is down - but certainly not out. There are already signs the economy has hit bottom and may start recovering. What will they do when the tables turn and they have bargaining power again?
In 2010 I was talking to a lot of purchasing managers in Asia who had driven hard bargains with Chinese suppliers when markets were slow - only to face shortages and price spikes when the market tightened.
Negotiate to win the supply chain- not to gouge the supply chain.
Structure China deals that will provide value to both sides - no matter what the economic environment. Start incorporating that into your negotiation plans now.