« Negotiating in China: Checking References | Main | Negotiating in China: Swiping the Cab Fare »
Negotiating in China: Trust is just the beginning
By andrew | March 13, 2007
Negotiating in China requires you to make a wide range of judgments about your counter-party. If you are negotiating with a local Chinese business person, you have to deal with a host of cultural traditional business practice issues. The issue of TRUST is going to come up early and often, no matter who the counter party is. But is not a simple matter of determining who is honest and who isn’t. Of course you should check references and evaluate the claims of everyone you do business with, but in China it’s a bit trickier. Save yourself a great deal of time, frustration and money by performing due diligence on three things:
Can you trust their intentions?
Can you trust their ability?
Can you trust their judgment?
Intentions – Do they plan to fulfill the terms of the contract or not? Are they honest and reliable? This is the most basic type of due diligence in China, and it’s relatively easy to spot those with bad intentions – they are the ones who can’t give you references from past satisfied customers or partners. Make sure you get current referrals, and check them carefully. Be sure that you are discussing the same individuals – not just companies or associations. You also have to make a value judgment about the people giving you you’re the reference, so don’t cut any corners here.
Ability – This is equally important. There are plenty of businesses and consultants operating in China who are completely honest – and completely incompetent. Good intentions are great – but don’t mean a thing if the person you are negotiating with doesn’t have the ability to do the job you need done. Chinese counter-parties often underestimate the complexity of the task they are agreeing to or misunderstand your standards. Get very specific very fast about jobs they have done in the past. Make sure you are clear about their experience – did they actually do the work you are discussing, or were they part of the team that did it? Beware of generalists when you need a specialist. Talk about deadlines and schedules, and be wary of unrealistic estimates. Find out what they WON’T or CAN’T do. A competent supplier or consultant will know their limits, and won’t take an assignment that they can’t handle.
Judgment – Standards are different in China, and your idea of an adequate solution may be very different than your potential partner. Ex-pats in China often complain about jobs that they consider to be 75% finished. You need to establish a “meeting of the minds” with your counter-party. Don’t be satisfied with vague statements or simple agreement. Drill down to details, and pose scenario-type questions. It is notoriously difficult to draw out the true opinions and feelings of Chinese business people, but that doesn’t mean they are being dishonest or evasive.
Chinese counter-parties are used to spending much more time getting to know their potential partners than westerners, and you may walk away from your initial meeting with lots of simple answers and agreements that don’t really mean as much as you think they do. Don’t be afraid to ask naïve questions or rephrase the same idea several times. If anything doesn’t sound 100% right, then take the time to explore it thoroughly.
Experienced negotiators in China know that what seems simple and clear at the beginning can quickly turn complex and confusing after money changes hands – even if it is only a relatively small deposit or up-front payment. Take the time to find reliable partners before you agree to anything, and don’t plan on relying too heavily on signed contracts. China business is known for its fluid and dynamic nature, and you may be forced to renegotiate the same agreement several times during the course of business. If you are dealing with an honest, intelligent, sincere counter-party, then that will not necessarily be a bad thing. But a poor choice of partner will yield problems far in excess of the amount of money at risk. It could result in the loss of valuable IP, time and opportunities.
Topics: China Business, Business Entry, Due diligence |
Comments
You must be logged in to post a comment.