Negotiating With Chinese Companies: Be The Rabbit

China technology licensing

As we keep saying here on the blog, Chinese companies in the last year or so have taken to trying to buy U.S. technology via just about any means possible. And as that has been occurring, we have been detailing how risky this can be for foreign companies with the technology Chinese companies want. Our previous blog posts have mostly explained the legal issues and traps these foreign companies so often find or put themselves. See Manufacturing in China: Do Not Be “Assimilated”China and The Internet of Things and How to Destroy Your Own Company, and Selling Or Licensing Your Technology to China

In response to our posts — both via comments and via emails –we have been getting requests we explain how exactly foreign companies should respond to Chinese negotiating tactics. This post is part 1 of what will be a multi-part series on how to negotiate with Chinese companies on technology deals — or really, any sort of deal. This part 1 is not so much geared to provide strategies, but to change mindsets.

The first thing you need to realize if you are going to be negotiating with Chinese companies (technology or otherwise) is that you need to stop bargaining like a Westerner and start realizing that your Chinese counterpart is not going to bargain in any way approaching what you view as fair. And if you can’t deal with that, you will pay the price.

Or as my friend Andrew Hupert likes to put it, you are the cow and no one “buys the cow when they can get the milk for free. In China, technology, IP and business methodology is the milk of profitable transactions. If you’re giving it away too early or too cheaply, then you are the expensive cow no one buys. Sorry.”

Many years ago, I had a very smart Westerner for a client who was very much into Zen Buddhism. With him we were negotiating a really tough deal with a Chinese company and every time the Chinese company would stall or push too hard or lie or agree to nine out of ten things one day and then three out of the same ten things the next day (all very common negotiating techniques of Chinese companies), my client’s response would be, “we will be the rabbit.”

According to this client, “being the rabbit” was a Zen concept of fighting back by not fighting at all, like a rabbit that goes limp when attacked by an eagle. So when the Chinese company would come back with massive changes from the day before, my client would send the Chinese company a really nice email saying something like, “I completely understand your new position and we will be reviewing it and responding when appropriate.” And then he would do nothing. Zero. Nada. Instead, he would just wait weeks and weeks until the Chinese company would come back and accuse him of having delayed this deal that needed to close so quickly. At that point, my client would say something like, I understand why you are in such a rush but we are not so if you can think of any way we might be able to speed this up, please let me know. The Chinese company would get so frustrated that it would start negotiating against itself and once it had reached the end of the line on that, my client would start negotiating again. I got the sense the Chinese company was simply not used to a Western company displaying Zen-like patience and it threw them off their game.

“Be the rabbit” is one tool among many that Western companies can employ when negotiating with Chinese companies. We will be providing more tools as this series continues.

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