Kiwis are culturally weak at negotiating. Having a contract prepared by a Chinese legal expert and overseen by a Kiwi lawyer can help protect your interest.
BY: YOK HAR LEE
For those who have nightmares to share, negotiating with the Chinese can be frustrating and infuriating. After all, Chinese militarist sun Zhi’s Art of War dictates that deception, or subduing the enemy without fighting, is the most potent battle strategy.
The Chinese hold their cards close to their chests while Kiwis tend to do the opposite. This is one of the most common mistakes Kiwis make when they sit down to negotiate a deal.
“One of the things about us Kiwis is we tend to put all our cards on the table, rather than hold them close to our chest,” says Pat English, New Zealand Trade and Enterprise’s trade commissioner in guangzhou.
This was echoed by Paul O’Brien, chief executive of good health Products, who says: “Kiwis need to be aware that culturally, we are weak negotiators. The Chinese negotiate everything. They are by nature savvy negotiators.”
MISTAKES
Another common mistake Kiwis make is being under-prepared against the Chinese in the negotiating ring. The Chinese are meticulous in laying the groundwork and doing their homework they spend an inordinate amount of time working their relationships, pushing boundaries every step of the way.
English says there are companies that show up for talks with Chinese unprepared. And although Kiwis lack understanding of China, they don’t necessarily invest time and money to build capability about how to do business with Chinese.
“Negotiations with the Chinese, especially with state-owned enterprises, often take longer than usual as bureaucracy is the norm. unless you have established the right guanxi (relationships), you will need lots of patience in dealing with different departments and getting the responses you desire,” says Teik Hock see, a project manager who spent six months in Xian, China last year, working on a power plant project undertaken by an Asian consulting engineering firm.
EXPECT VARIATIONS
For a successful or viable deal, be it commercial or engineering, he recommends building in allowances for contract variations in scope, prices and schedules.
“Written contracts are not necessarily 100% safe and solid. Translations (Chinese to English and vice versa) of documents, especially involving technical and legal jargon, may give rise to ambiguities which are often used by the Chinese as grounds for concessions. Even if there is no ambiguity, the Chinese may still ask for concessions, solely on the grounds of guanxi,” see says.
O’Brien’s experience tells him that Chinese don’t necessarily see the contract as a legally binding document. “Around Asia, Chinese from other Asian countries are themselves suspicious of the Chinese and have different mindsets.” he says to “never get complacent” as one can never truly understand the complexities of working within China. “It’s a jungle there – I’m still learning, I never let my guard down. The real deal-making begins after your contract’s been signed,” he says.
USE CHINESE LEGAL EXPERTS
This is why it is crucial for Kiwi companies to seal contracts based on Chinese law, using a local Chinese legal expert and, later, having contracts reviewed by a New Zealand legal adviser, NZTE’s English says.
He says it is a myth that contracts cannot be enforced in China. “sure if you use a template format – and I have seen people presenting what looks more like an invoice than a legal document – then it is hard to enforce,” English says. “When you are structuring a deal in China – and things do turn pear-shaped – make sure you are not overly exposed. Don’t have a rigid document. Have one that can be adapted to a changing business environment,” he adds.
DINNER AND NIGHT CLUBS
Your business negotiations practically start from the time you arrive, around the dinner table, the drinking and the night-clubbing that often happens.
“You are expected to wine and dine with the Chinese, who are often good hosts. It is rude to decline drinking with the Chinese unless you have valid medical reasons. Joining in the drinking and, better still, toasting the senior officers, will quickly strengthen your guanxi with them,” says see.
In fact, it is just as important to read between the lines during these dinner or social sessions, English says. “Kiwis get swept away by the generosity of the Chinese. They make you feel welcome and special, giving you gifts and dinners. A lavish meal can mean one of many things – that we are going to do business, we are just trying to be polite or, sorry, we don’t want to deal with you. Over time, you develop intuition about this.”
ALL ABOUT FACE SAVING
China is deeply rooted in Confucianism and visitors tend to get treated with great respect.
“The Chinese tend to give ‘face’ to visitors so they would avoid asking questions that might embarrass visitors. They tend not to give ‘negative’ answers even around the negotiating table,” see says, adding that it is important to tactfully verify the discussions after the official meetings to avoid misunderstandings.
Chinese also hate to “lose face” (show their weakness), O’ Brien says. “There is the tendency to not tell the truth or to withhold information.
”He cites a case of a distributor who signed a deal way out of his league, knowing full well he had no hope of fulfilling it. “He had three or four shops … and led me to believe he had 50 or 100. That’s partly my fault – part of my learning. It has made me tough, more resilient and, also, less accepting.”
John Hancock, from Trinity Hill Wine, which exports to 22 countries, has been learning the ropes about how Chinese work. “There is a lot of interest in wines from China. We’re getting visitors, calls, emails, but 99% of those are not viable.
We are trying to sort out who’s serious and who’s not. Many like to be involved but some of them know nothing about wine.”