Like at the bazaar?
„At first, everything proceeded in a very proper and formal manner. The longer the negotiations went on,
“The discussions dragged on, and the deeper we delved into the details, the more it felt like being at a bazaar. We literally spent hours haggling over the finer points," said the chief negotiator for a German automotive supplier.
Chinese negotiators have immense perseverance when it comes to clarifying details that are important to them. They expect the same from their negotiating partner. The stages of the negotiation in which concessions are made tend to be lengthy. Remain just as tenacious as your counterpart, whilst at the same time maintaining a positive atmosphere. Concessions should always be discussed with a view to balance and a win-win outcome. Do not forget to use reciprocity („if…, then…“) as a basis, and link a demand from the other side with a demand of your own.
Work in Progress: The Contract
In China, it is quite common to amend terms that have already been agreed upon during the next round of negotiations. There is not always a sense of „contractual consistency“ or an obligation to adhere to agreements that have been concluded. For this reason, all outcomes of negotiations should be recorded in detail in writing, regardless of whether the agreement has been reached in part or in full. Verbal commitments do not usually last very long.
It is advisable to clarify the other party’s powers of attorney at the start of negotiations. Are they authorised to conclude a deal, or are they initially only there to gather information and sound out the situation, so that another member of staff can then conclude a binding agreement in the next round of negotiations? As China is a socialist country, trade is generally conducted through state-owned enterprises or government agencies. With a few exceptions, such as tenancy agreements, there is relatively little restriction on the drafting of contracts. Certain regulations are in place, but experience shows that these can be met with „pro forma“ provisions. For domestic transactions, it is worth bearing in mind that a relevant contract law has only been in place for a few years and that the issuing of licences, which are required for many transactions, can take quite some time.
Complex legal situation
In China, lawyers play an important role for foreign business partners. Lawyers serve not only as legal advisers, but often as interpreters as well. If you wish to engage a lawyer, the question arises as to whether to choose a Chinese lawyer or a foreign lawyer working for an international firm in China. Whichever way you decide, there are still pitfalls: on the one hand, a Chinese lawyer loses their membership of the Chinese Bar Association if they join an international law firm in China.
On the other hand, a lawyer qualified abroad is not authorised to provide an expert opinion on Chinese law. The best choice is a lawyer from an international law firm who understands the Chinese mindset and is not dependent on the government. Internationally active law firms often employ Chinese nationals who have studied abroad. These individuals are familiar with both Western and Chinese ways of thinking. Much of what is regarded as standard negotiating practice in Germany requires written confirmation in China. As mentioned, the Chinese treat contracts as they would laws: they are worded vaguely, leaving room for different interpretations. From a Chinese perspective, this approach to drawing up contracts takes account of the „human side“; the „legal nit-picking“ of Western managers is often met with a lack of understanding.
When it comes to the Chinese sense of justice, choosing the right lawyer pays off just as much as being creative in marketing and negotiation. For example: whilst we talk about trademark piracy, the Chinese tend to focus more on the appeal of the product itself, and any imitations are seen as a mark of distinction for the original.
This situation can be overcome, as the example of Coca-Cola shows: before production began, the company launched a wide-ranging media campaign. The public was informed about what a registered trademark is, what the Coca-Cola brand stands for, that its purpose is to guarantee quality, and that imitations are illegal and of inferior quality. Such initiatives pay off: despite specific instances of trademark piracy in China, Coca-Cola is very successfully positioned in the market there.
