The key to negotiating successfully in China is building useful relationships -- and the key to relationships is the Chinese notion of "Guanxi".  Technically it translates as "relationship" -- but it means much more.  The textbook definition we like is:  "a network of counter-balancing connections and relationships among members of a (business) community," but that is just a jumping-off point.  In this video lecture, we'll discuss the five main rules of building and maintaining a guanxi relationship with a Chinese business partner or negotiating counter-party.    

Guanxi and relationship-building isn't just a good way of maintaining business connections.  In China, a guanxi network is an important tool for assessing the character and abilities of a potential partner.  Financial statements and 3rd-party ratings aren't highly valued in China, but a good network speaks volumes about a negotiator's value.  Learn how the Chinese side of the table is assessing your character, and learn how to do the same.  In China, relationship-building is really a due-diligence process.

Chinese banquets are legendary among international businessmen.  Don't confuse the traditional Chinese banquets with dinner parties or Western-style entertainment.  Part cultural experience, part fraternity pledge hazing - the Chinese banquet is your opportunity to impress and be impressed.  But don't be fooled by the laughter, drinking and party-atmosphere -- you are very much on the job.  This is work, and the stakes are high.  If you don't handle yourself properly at the initial banquet, you will have a very tough time convincing the Chinese side that you are a serious partner.  This lecture will show you what's going on in the minds of your Chinese hosts.

A quick & dirty overview of the cultural analysis process.  EOTS (end of the story):  More formality and protocol, more relationship-building.

Introduction to Cultural Analysis.  We are applying a very narrow focus -- we want to know how we can leverage Chinese cultural norms, values, and behaviors to get the best deal possible.

Behaviors are real -- they are what you see, hear, and experience first hand from the person across the table.  Culture drives behaviors -- and this is the point where culture and negotiation interact.  Remember -- your tactics appear as behaviors to your Chinese counterparty.  The most important behavior right now?  Wanting to see you succeed in China. 

Your analysis will turn up gaps between your culture and China's.  You can try to reach an understanding using "best-efforts" methods, or you can build self-reinforcing structural responses.  You want them to want to see you win?  Pay them for it.

The first index is the most important.  PDI, or Power Distance Index, measures how comfortable a society is with inequality and uneven distribution of wealth and rewards.  China's is high -- the US' is low. 

Let's continue our conversation about negotiating successfully in China by talking a little about how Westerners get into trouble when putting together deals with Mainland counter-parties. The main culprits:  bad planning, bad partnerships and bad deal structure.

Are Chinese negotiators long-term planners or short-term traders?  The answer may vary depending on how YOU handle yourself.  Traditional Chinese businessmen may prefer to start a deal by building a relationship, but only if they think there is value in it for them.  The good news is that you have a lot of control over how the deal unfolds.  The bad news is that once it starts going wrong there’s no stopping what comes next – quality problems, IP theft and assorted aggressive tactics.   

We've covered many important facts about how to develop relationships and build guanxi with Chinese counter-parties -- but the path to business success in China is not without risks.  This section lays out some potential mistakes and warnings that you should review before starting a negotiation.  Chinese businessmen are generally friendly and eager to forge ties -- but one wrong move or embarrassing misstep can negate all your hard work.  Be careful out there.

We finish up the class Negotiating for Success in China with a list of 10 best practices that you can refer to in all of your future dealings with Chinese counter-parties, either in Mainland China or in your own home markets.  Chinese negotiation is more relationship-oriented than many Westerners are used to - but it is still all business.  Learning to build and manage relationships is the essence of negotiating well in China, and this list of best practices will help you achieve success now and in the future.  Good luck.