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Business Costs & Regulation

How to Profit in China’s Booming Economy: Getting Started

China's booming economy continues to move forward at breakneck speed, and scores of American business are profiting handsomely from China's impressive economic growth. But there are many challenges facing companies that wish to successfully enter the Chinese market. U.S. businesses need sound strategies to help navigate the tricky waters of China's rapidly changing marketplace. One of the most important things to understand is the difference between Chinese and American negotiation styles.

The following is an edited excerpt from the Kiplinger audio conference titled How to Profit in China’s Booming Economy: Getting Started. Michael Turner, Director/Partner with ChinaOrigins Associates, a consulting firm that helps businesses break into Chinese markets, explains what it takes to successfully negotiate business deals in China.

Chinese negotiators are shrewd and use a wide variety of bargaining tactics. The following are just a few of the common strategies:

Controlling the meeting place and schedule. The Chinese know that foreigners who have traveled a long way will be reluctant to travel home empty handed. Putting pressure on foreigners just before their scheduled return can often be beneficial to the Chinese side.

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Threatening to do business elsewhere. Foreign negotiators may be pressured into making concessions when the Chinese side threatens to approach a rival firm if their demand is not met.

Using friendship to extract concessions. Once both sides have met, the Chinese side may remind foreigners that true friends would reach an agreement of maximum mutual benefit. Make sure that the benefit is genuinely mutual.

Showing anger. Despite the Confucian aversion to displays of anger, the Chinese side may put on a display of calculated anger to put pressure on the foreign party, who may be afraid of losing.

Banking on attrition. Chinese negotiators are patient and can stretch out discussions in order to wear the other side down. Excessive hospitality the evening before discussions can be another variation.

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Now that you understand a few tactics that Chinese negotiators use, you can play the game yourself. Here’s how:

Be absolutely prepared. At least one member of the foreign team must have a thorough knowledge of every aspect of the business deal. Be prepared to give a lengthy, detailed presentation, taking care not to release sensitive technical information before you reach full agreement.

Play off competitors. If the going gets tough, you may let the Chinese side know that they are not the only game in town. Competition between Chinese companies is growing. Use it.

Be willing to cut your losses. Let the Chinese side know that failure to agree is an acceptable alternative to making a bad deal.

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Cover every detail of the contract before you sign. Talk over the entire contract with the Chinese side. Be sure that your interpretations are consistent and everyone understands their duties and obligations.

Be patient. Chinese believe that Westerners are always in a hurry, and they may try to get you to sign an agreement before you have adequate time to review the details.

To learn more about doing business in China, click here to buy the recording of the full audio conference.

In addition to negotiating tactics, you’ll recieve information about:

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• The outlook for China

• How Chinese culture plays an important role in business

• Finding the right partner

• Structuring your business

• Market research and due diligence

• Regulations, licensing, and certifications

• Handling management issues and solving common problems

• Everyday rules to guide your business in China

• Helpful resources