Business negotiations - "east meets west"
While business deals between Chinese and Western parties are done with an increasing frequency, many of the negotiations are carried out by western parties who have had no previous dealings with Chinese businesses and / or Chinese parties who have had little or no experience negotiating with westerners.
This situation is likely to continue for the foreseeable future as parties attempt to take advantage of, or position themselves for, opportunities resulting from China's admission to the World Trade Organisation (WTO).
In such situations business culture may need to be considered as well as the specifics of the deal and the negotiations.
As an example, it can be common for the Chinese party to assume that all aspects of a proposed deal are negotiable and incorrectly believe that the deal has been structured in anticipation of heavy bargaining.
Conversely, a western party may incorrectly assume that the Chinese party expects lawyers and other advisers will be charged with suggesting major amendments to draft contracts rather than being done through continued face-to-face negotiations between the parties.
These are just some examples that we come across that have disrupted negotiations with potentially disastrous consequences. These examples resulted purely from one party misunderstanding the business culture of the other party. However, in both cases the misunderstandings raised questions as to trustworthiness of the other party, whether they could do business with the other party in the future and whether the negotiations should proceed.
Regardless of being briefed as to the business culture of the other party there is, in the cut and thrust of tough negotiations, a tendency to retreat to the comfort of the business culture that each party knows best.
In these situations, a person with an understanding of both eastern and western business culture acting as chairperson or mediator can be invaluable. That person would not be aligned to either party and would have to be respected / trusted by both parties.
Negotiations can in themselves be difficult and complex. Anything that can prevent the added risk due to misunderstanding of business cultures has to have merit.
The right person as chairperson or mediator for a negotiation can go a long way to achieving this.
This information has kindly been provided by GNS China, a corporate and investment advisory firm that specialises in the China market. For further information, please contact GNS China at: info@gnschina.com or visit: www.gnschina.com.
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