Are Chinese negotiators long term partners or short term opportunists? Slideshow

Is your Chinese negotiating counterparty a long term partner or a one-time opportunist? It may depend on you.

Watch the slideshow:

Note to educators and trainers:  If you would like a free license to use this material in your class or program, contact us at ChinaSolved@gmail.com .

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Guanxi – On the Wane in Chinese Negotiation? Don’t bet on it.

The Good and Bad Aspects of Chinese Guanxi

As the Chinese economy develops and grows increasingly international, will traditional Chinese business customs like guanxi become less important? Since returning to the US and talking to American businesspeople about negotiating deals in China that question has come up several times — though more often than not it’s more an assertion or hopeful statement rather than a genuine question.

Is guanxi on the wane in Chinese negotiation? The quick answer is NO. The complicated answer is Yes, No and No again.

Before we look at trends in Chinese negotiation going forward, let’s take a moment to examine the path that leads up to the present situation. (For more details, see this slideshow or these videos  )

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RPI Greater China Business Club Blog: Andrew Hupert discusses aspects of negotiation in China and other important skills to succeed in China

 

Andrew Hupert actively blogs in ChinaSolved.com and ChineseNegotiation. His book Guanxi for the Busy American (guanxi 关系, literally means personal relationship but conveys more context than that) and the soon to be released The Fragile Bridge: Conflict Management in Chinese Negotiation are very insightful and practical. Today, we are lucky to have Andrew with us sharing his insights on how to negotiate in China and what are the other important skills to succeed in China.

Jackson: Could you talk a little about yourself, your teaching activity, your blog, books, and your services?

Andrew: I’m a consultant and a corporate trainer who helps with Western companies be more successful in China. My specialty is negotiation, and I have a unique approach. I’m targeting those American and Western professionals of a certain age (40 years or over) like myself, who are not going to spend a year or two learning the Chinese culture or language. Guanxi for the Busy AmericanMy specialty isn’t understanding China that much, but rather the needs of Western executives and Western negotiators.

So I’m the translation point. Every cross culture business needs a cultural translation. And the further away you push that the more difficult it gets, and there is a much larger chance that there is a misunderstanding. I take on the challenge bringing the translation of culture as close to Western negotiators as possible.

Jackson: What are the biggest surprises from the Western negotiators after hearing your lectures?

Andrew: I’m always surprised that the American side really doesn’t plan on changing. It might be a generational thing instead of a cross-cultural thing. Most of the people I speak to are 40 years old or over. There is tendency for Americans to think that anything that varies from American best practice is a deficiency or a mistake on the part of the other person. So Americans come in with the bias that over time the Chinese side is going to become more American. They feel that if you give them enough time, if you are patient, and if you speak slowly and loudly, the Chinese side is going to behave more like an American MBA.

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Guanxi and Americans Doing Business in China -10 Caveats

(excerpt from the mini-book, Guanxi for the Busy American)

Guanxi is Chinese business.

When the literature talks about ‘cultural barriers’ between China and the West, be aware that the key differences are not “fork & knife vs. chop sticks” superficialities – they are deep-seated core beliefs like guanxi vs. due diligence. When you tell your Chinese associate that guanxi is an archaic custom, it is like HIM telling YOU that checking references and analyzing financial reports are silly wastes of time.
If you plan on working with Chinese, the issue of guanxi is certainly going to come up.
Here are 10 rules for dealing with Chinese partners who believe in guanxi:

Caveat #1: Do not be overly dismissive of guanxi.

Guanxi for the Busy American

The new eBook by the publishers of ChinaSolved and ChineseNegotiation

Guanxi may or may not have real benefits – but what really matters is that the Chinese people you are speaking to genuinely believe in it. When I am doing business with Chinese counter-parties who are too quick to disregard my advice about performing due-diligence or market research, it sends me the wrong messages about their general competence and respect for American methods. Likewise, when you dismiss their advice about guanxi, you may be correct – but in the wrong way. You may mean, “I don’t want to engage in corruption or shortcuts” but they may hear “I don’t understand Chinese methods and don’t have much respect for your opinion”. The first conversation you have with a Chinese counter-party about guanxi is the perfect time to discuss the approval process of your deal or business. It is also an appropriate time to take the moral and ethical temperature of your counter-party, industry, and general practices in your new business.

Caveat #2: Chinese really believe, not only in guanxi, but also in its uniquely Chinese characteristics.

The only thing worse than saying ‘guanxi doesn’t exist’ is to say, ‘every business culture has some form of networking and relationship building’. Many Chinese – particularly those not experienced with international business – find this insulting. (A later post will deal with the issue of Face – not to be confused with western notions of pride, status or reputation). Westerners tend to look for common ground, but Chinese may consider it a swipe at the integrity of the Chinese culture.

Caveat #3: If your new partner’s only contribution is guanxi connections, you had best be on your guard.

Chinese consultants and counter-parties know that you have read that guanxi is vital to business in China. In other words, your counter-parties may believe that building guanxi is a short-term goal of yours. When I was in Beijing in the early 90s, it was a sure bet that every foreigner gathering or junket had at least one guy who offered to connect you with the right people. In those days, it was a real job because doing business in China was so opaque and convoluted. Nowadays the rules are much more straightforward – for good or ill. You should not need special connections to get most approvals – and if you do then you should take it as an indicator that your business plan has flaws. In 2010 China, most experienced Chinese managers should either have the necessary connections or know how to develop them as needed.

Caveat #4: Guanxi is a rental, not a purchase.

Guanxi does not transfer. When your guanxi guy goes, so does the relationship. Your guanxi relationship is with a person at the organization — not the organization itself. When your special relationship at the ministry, regulator, supplier or distributor moves on you have to start all over.

Caveat #5: Guanxi cuts both ways.

It places obligations upon you – and you do not always control how you will pay back a guanxi debt. Examples have included pressure to accept low quality production, delays, inferior materials, IP theft, material theft, corruption, nepotism, etc. Remember – guanxi is a series of favors, and you have to give to get. The problem is that you have only the most limited control over what you will be asked to do, and how it will be valued. That is the side of guanxi that people do not talk about with Westerners much, but Chinese understand well.

Caveat #6: Guanxi is not the same as corruption, but it can be close.

The regulatory standards are higher for Westerners in China – both among Mainland bureaucrats and those back home. Even the appearance of corruption can come back to haunt Western dealmakers – and it is definitely your responsibility to monitor and control the activities of your employees, partners and agents. ‘Business as usual’ for local Chinese is too weak a standard for foreigners. You need to have rule & procedures and prepare for different contingencies. If a Chinese businessperson appeared in a US court and said, “but someone I just met told me that everybody ignores that local zoning regulation”, he might appear dishonest, arrogant and/or clueless – but extremely liable. Well, you’ll come off the same in a Chinese court when your new guanxi connection goes awry.

Caveat #7: Foreigners cannot really build quanxi up the same way that locals do.

 

Guanxi for the Busy AmericanConsider the difference between a business proposal from your high-school buddy or  college roommate and a Chinese businessperson that you’ve had dinner with a few times. Both constitute a connection – but your relationship with your former roommate has completely different characteristics. You can be more honest with him about his ideas, make suggestions and possess a deeper understanding than you ever would with the Chinese counter-party. The danger isn’t necessarily that your Chinese associate will try to cheat you – he may kill you by being overly polite and sensitive to your feelings.

 

Caveat #8: Distinguish between everyday guanxi and ‘special relationships’.

If your counter-party’s guanxi is rooted in familiarity with ‘standard operating procedure’ at the ministries, regulators, supply chain and distribution channels -then the situation is fine. It is a normal business competence that weighs in his favor – but is more of a basic requirement than a game-changer. But take note of ‘special relationships’ – like a close relative of an official or executive at a customer or supplier. These are the entanglements that get messy quickly.

Caveat #9: China has laws now.

Chinese have a very high regard for bureaucracy, procedures and regulations. Guanxi is not as important as it once was, and low-level transactions and routine approvals should not require special connections. In fact, circumventing basic rules can cause BIG problems later on. Remember that it is much easier for foreigners to get money into China than getting it out. It is easy to find fixers who can speed your investment through – but getting the licenses and permissions to actually sell goods, repatriate profits and move money may be a different story.

Caveat #10: People with guanxi may be able to open some doors for you – but they  can also slam them in your face.

Strangers are not generally ripping off the Westerners who lose investment, IP and assets in China usually. 9 times out of 10, the same Chinese who were selling their powerful connections turn around and lock out the Westerner once the assets are transferred.

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What Do Busy Americans Need to Know About Guanxi?

Busy Americans want to transact business and move on to the next challenge. When it comes
to doing business in China, busy Americans respect the local feelings, attitudes, customs,

Guanxi for the Busy American

culture, history and society – but also know that they are not Chinese and never will be, no matter what they do. They want to master the skills and learn what is needed to get the job done as expertly and competently as possible. To them culture is one of many skills that needs to be mastered. They do not need get a PhD in mathematics in order to fill out an invoice, and they are confident operating a telephone without being able to design a microchip. Busy Americans approach culture as one of many factors necessary successful management.

The goal of ChinaSolved is to help those busy Americans who want to learn exactly what they need to do business in China effectively and efficiently. There is not enough time in the day to delve too deeply into the minutia of Chinese culture and history – but they also do not want to be unprepared, naïve or buffoonish when meeting with Chinese colleagues and partners. Busy Americans have the experience and wisdom to know that one cannot be an expert in everything, and should not try. The main skill of executives is knowing what questions to ask and where to find the expertise to get answers.

ChinaSolved

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Guanxi – 2 Types of Guanxi Partners

Guanxi for Americans Doing Business in China

excerpt from the mini-book, Guanxi for the Busy American

Guanxi is a key concept for Americans doing business in China.  Chinese negotiating counterparties like building relationships as part of the deal-making process, but they aren’t usually big fans of the type of even-split, 50-50 partnerships that Westerners favor. Traditional Chinese negotiators are more comfortable with a clear hierarchy. On one hand, they can be the alpha male who sets the rules and the pace – leveraging on their China knowledge and local contacts. But they are also comfortable elevating you to god-like leader status while they fawn and give face – and don’t contribute much else.

 

The only role that you aren’t likely to see a traditionally Chinese counterparty take on is the one you want – an equal partnership. If that’s what you are after, you had better plan on spending a lot of time searching out the right counterparty, and you’ll still have to negotiate very explicitly and thoroughly from the very first meeting.

Guanxi Type 1: Your new best friend

• Some Chinese counter-parties will use flattery, friendship and social events to build a cordial relationship.
• This is a ‘sales-type’ approach. He is selling his services to you, and he wants a salary or expects you to buy goods or services from his firm.
• Good news – they may be taking the initiative to build a strong, healthy, win-win relationship.

Guanxi for the Busy American

The new eBook by the publishers of ChinaSolved and ChineseNegotiation

• Bad news – they may be pressuring you to reciprocate with better deal terms, IP, or relaxed QC/compliance requirements. He thinks his flattery and submissive behavior is a valuable service and expects compensation.
More bad news– This scenario often leads to  a balance of power shift. Once he has your money, technology and know-how, your status becomes somewhat less god-like. >
Even worse news  – Those pretty young girls half your age who laugh at your jokes and think that you are so wonderful… yeah, they are in this category. Sorry, but someone had to tell you.

Guanxi Type 2: Your guide, teacher – and boss?

• Chinese businessmen will offer to help you through their connections, insider knowledge and guanxi with suppliers and regulators.
• Consultative approach. They are offering to help you solve specific problems and clear away existing bottlenecks.
Good news– They may really know what they are doing and can facilitate your business.
Bad news– They feel that they are in charge of the new partnership.
More bad news– You probably need them more than they need you, so you are negotiating from a position of weakness.

Beware of your American impulses to treat every relationship as an equitable, just, “we’re all in this together” 50-50 partnership. It could be taken as a submissive gesture – which can invite aggressive, value-grabbing behavior.

ChinaSolved

Guanxi is China business

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Guanxi is China business

Guanxi is vital for Americans doing business in China.

Guanxi is a paradoxical element of Chinese culture for American and Western businessmen  Guanxi for the Busy Americandoing businss in China.  Americans businessmen know the word guanxi, but they may not know what guanxi really is.

Guanxi is Chinese business.  Guanxi is integral to relationship building — which is crucial to Chinese business.  Guanxi may or may not help you do business in China, but NOT knowing how to develop and manage relationships with Chinese counterparties can destroy all your hard work and careful planning.

ChinaSolved

Guanxi is China business

 

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