China, Contracts

How To Negotiate With Chinese Companies (Part IV)

Your Western assumptions are not likely going to line up with the assumptions of your Chinese counterparts. Find out why.

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In our first three posts in this series, here, here, and here, I focused on negotiating techniques commonly used by Chinese companies and how to counter those. In this post, I focus on the cultural disconnects that so often impact negotiating between American and Chinese companies.

1. The Role of the Contract. American companies fixate on contracts and legal institutions. We value contracts over relationships. We believe contracts can and should be used to assign liability in advance. The typical Chinese company thinks it bizarre that Americans consider contracts binding even when the market environment changes. Chinese companies generally believe that as the external situation evolves, so should the business relationship. There will almost always be this tension when negotiating with a Chinese company.

2. Perpetual Negotiations. Americans generally believe negotiations end once the contract is signed. But to most Chinese companies, constant negotiating is part of a normal (and even healthy) business relationship. Why build a good business connection if you are not going to grow the relationship by continuous give and take? Sometimes (but definitely not always) it will make sense to leave something vague in your China contract that you would not ordinarily leave vague in a similar contract with an American company.

3. Common Ground. American negotiators love to talk about “finding common ground” or engaging in “win-win” negotiating. Chinese companies generally do not care or do not believe in finding common ground. Chinese companies do not believe in win-win negotiating; they believe it is their job to win on every single point and leave it to the foreign side to protect itself. Chinese companies want it all and no matter what you do, they are usually going to believe that the Western side wants it all too. This means that you talking about “finding common ground” or seeking out a “win-win” situation will likely only cause the Chinese side to view you as disingenuous and using those words only to cloak your real intention of gaining whatever advantage you can.

The above is not meant to be an exhaustive list of the cultural disconnects you will face when negotiating with Chinese companies. Rather, it is intended solely to try to convince you to recognize that your Western assumptions are not likely going to line up with the assumptions of your Chinese counterparts. And do not mistake English language fluency on the Chinese side (which can be relatively easily learned) with cultural fluency (which incredibly few people have). I am not saying that you should view your Chinese counterparty as an alien, because you should not. But you also should not view them as being just like your neighbor in Kansas or Kalamazoo either.

Dan Harris is a founding member of Harris Moure, an international law firm with lawyers in Seattle, Chicago, Beijing, and Qingdao. He is also a co-editor of the China Law Blog. You can reach him by email at firm@harrismoure.com.

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