China Business

Negotiating with Chinese Companies: How You are Viewed and How You Should Respond

China IP theft

In a very short and very helpful video — The big secret in Chinese/Western negotiations? — China negotiation expert Andrew Hupert explains two things of which you should be aware when negotiating with Chinese companies.

The first is that most Chinese companies are not so much looking to do a long-term deal with you, but rather, to secure your IP. In Chinese Free Look Schemes to Steal your IP we wrote about the various ways Chinese companies will feign interest in doing a deal with you when what they really want is your IP for as little cost as possible.

This post deals with how to negotiate away from a free look scheme.

Hubert starts by noting how once you have been “partners” with a Chinese company for more than six months your China partner probably thinks it can earn more without you. Hupert goes on to say that Chinese learning curves are much steeper than western learning curves and because of this, Chinese companies are usually not terribly afraid of you leaving them and going it alone. Once they see your IP, they are over-confident about their ability to make use of it. I completely agree with Hupert and would only add that Western companies tend to be over-confident about the inability of their Chinese counterparts to take what little IP the Western company gives and run away with it and start competing.

Hupert then discusses how your Chinese partner likely believes that without its help, you will not be able to function in China and once it sees your technology it typically believes it is “competing on a more or less even playing field with you as far as the product is concerned.” I love how Hupert says that if (as is so often the case) it seems your Chinese counter-party is spending most of its time trying to uncover your intellectual property and asking questions about your business processes, it’s because they are. Again, I completely agree. I can remember many times where one of our clients did not believe its Chinese counter-party was seeking to take its IP and was eventually proven wrong, but I cannot remember a single time where a client believed its Chinese counter-party was seeking to take its IP and that was not the case.

Per Hupert, the second thing of which you should be aware is that to protect your interests, you want your Chinese counter-party to work with you all the while believing you will provide new technology and even more valuable ideas to it in the future. But at the same time, you also want your Chinese counter-party to fear that you may team up with a different Chinese partner. “This hope-fear dynamic is your best best for building a good, healthy relationship in China.” Again, I completely agree and in fact, I add the following PowerPoint slide to nearly all talks I give on China:

How to Structure Your China Deal
I put this PowerPoint slide in nearly all of my China talks because — like Hupert — I see this as the key to negotiating deals with Chinese companies that work.

For more on negotiating with Chinese companies check out the following:

Or go all out and spend $4.99 for the Kindle version of Hupert’s book on negotiating with Chinese companies, 10 Common China Negotiating Mistakes: A Survival Guide for Front Line Negotiators and Team Leaders.

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