The China Venture

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To achieve good personal relations, it is important to meet regularly with the potential Chinese partners. Continuous contact via telephone, fax and le tters cannot replace the personal face-to-face meeting. It is also important to have informal meetings besides those at the negotiation table, such as at a Karaoke bar, at dinner, etc. This was highly recommended by nearly all of our interview partners. One said, that you have to meet so often at an informal level and talk about the Joint Venture, that in the end, everybody is saying the same thing and nobody is losing face. It helps both sides to get to know each other better. Another important factor, me ntioned by our interview partners, is that the Europeans should adapt to Chinese’s negotiation tactics. They have to learn the way Chinese do business and how they negotiate. This learning will take a long time, and is mainly a process of trial and error, and can hardly be learned before going to China. A recommendation of our interviewees on how to handle this problem is the following: "Be very flexible at the initial stage". This sentence is a central statement. The "Letter of Intent" is only used to convince the governmental institutions, it is not a pre-contract. Here, one can make concessions, but do not move too far from the final goal. Despite economic development and opening to the West, the Chinese keep their traditions. Two main topics in this context are seniority and hierarchical thinking. This means, that the oldest is the leader of the negotiation team and decides. There are no democratic decisions. Because of this acceptance of authority, you have to be sure about your goal and strategy. An example, that illustrates this point, is, that in a Chinese negotiation delegation only one person is talking, whereas in a German or Swiss delegation, everybody is talking. Chinese are very analytical and once they recognised that there is no common strategy in the European team, they will try to use this to their own advantage. Therefore, negotiation meetings have to be very well prepared for by the Europeans as the Chinese are well prepared. You have to stick to your strategy, otherwise one single remark can turn the whole negotiation process up-side down. During negotiations, Chinese often switch negotiators and the subject. This is not bad at all. Think of the following, which happened to one of our interview partners: You negotiate e.g. a whole year without having found a single solution or common level. If now the Chinese switch the negotiators, it can also be an advantage for you, because with the new team you can start the discussion again, and the possibility to find a mutual solution could be much higher. 138
Another Chinese tactic is, as mentioned above, to delay decisions. Europeans should not be too astonished if the first question on their arrival in China is for their flight back. A preferable answer, in this case, is to say that you stay as long as the negotiations will last. One interviewee suggested to present a shorter time table or leave the returning flight open. When the Chinese know the return date, a typical negotiation week may look like this: First half of the week will be spent on social activities and dinners at the evening. The "friendly banquet" during the negotiation period is used by the Chinese to get to know the European partner better. The second half will be general discussion and on the last day the real contract negotiations will start. That way, Chinese try to force the foreign partner to make more concessions and accept a less favourable contract. They know that you cannot go back home without achieving anything. "The end of a negotiation period is the beginning for further ne gotiations." In China, a contract is not rigid. It can happen, that after a contract is negotiated and ready for signing, the Chinese partner wants to discuss the subject again. Recommendations There is no general recipe. Nobody has a hundred per cent success formula. However, there are some recommendations, made by our interview partners, which may help. A Joint Venture should always be based on partnership. Win their trust and be prepared for compromises. Be patient, reserve a lot of time and be sure that your goal is not to far away from that of your partner. A good personal relationship is a very important success factor. Stay in regular contact, even if there are no problems. This will show your interest. You will have the opportunity to feel the mood of the employees of the Joint Venture. Take care of your expatriates. You can use their knowledge of the Joint Venture and China for other employees and the mother company. Remember, that everything is translated in China. This is one reason why everything takes longer. In most Joint Ventures of our interview partners, the President is Chinese, the Vice President is German or Swiss and the General Manager is German or Swiss and the Vice General Manager is Chinese. This is because Chinese still have the hierarchical thinking, and a Chinese President knows Chinese business better and can use his influence and connections for the Joint Venture. The European, as General manager, can contribute the technical and management knowledge. Hong Kong and overseas Chinese can act as intermediates and catalysts, because they know both worlds, the Western and the Chinese one. 139
Page 1 and 2:
The China Venture: Business Environ
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Table of Contents List of Figures .
Page 5 and 6:
3.2.3.2 Special Funds for Setting U
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3.4.1.1 National Culture ..........
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List of Tables TABLE 2-1: THE AREAS
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GBP Pounds Sterling GDB Guangdong D
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1. Introduction: The China Venture
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After a short discussion with the p
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co-operate with other firms, especi
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The Chinese operating legal system
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First of all, Britain’s predomina
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democratic centralism, all governme
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The courts are the state organs exe
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more than three hundred intermedia
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2.2.8 Company Law China’s first n
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Things seem have to become a lot cl
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2.3.1.1 Financial sector developmen
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securities, trading, initial public
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underdeveloped compared with market
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established in January 1996 by 59 p
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Chinese Banks Foreign Banks Financi
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system formulation has been put on
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The separation of production and co
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swap centres (see also above). From
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investors with little experience an
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them, while a branch with a shortag
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Loans, public offerings of shares,
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is often to acquire foreign capital
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2.3.3.2 Debt financing As getting t
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the approval of special authorities
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control compared to national enterp
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usiness in China and related issues
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3. Pre-Entry Strategic Consideratio
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While the testing for the general r
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of relevant contacts to suppliers a
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partner companies with free servici
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strengths which his own company lac
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Central Committee of the Communist
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environment for foreign investment
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legal and regulatory environment of
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3.2.4.3 Legal Framework for Foreign
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• China’s entry into membership
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• stipulates that advanced techno
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Government approval. Foreign invest
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Co-operative Joint Venture Status P
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Reflecting on these points the foll
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Success Factors concerning Products
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Success Factors concerning Company
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high-technology are eligible for th
Page 99 and 100: Available Distribution Channels A m
Page 101 and 102: Available Distribution Channels Mar
Page 105 and 106: Illustrative Case Studies The follo
Page 109 and 110: Which Aspects should SME's Focus on
Page 111 and 112: Strategy No. 1: Have Cash A comfort
Page 113 and 114: expenses have a detrimental effect
Page 115 and 116: As a conclusion, network oriented m
Page 117 and 118: 3.2.13 Case Study: Swisstec, Lyss 3
Page 119 and 120: factor which makes the foreign firm
Page 121 and 122: developed within the SME, its impac
Page 123 and 124: 3.3.1.3 The Role of Technology Mana
Page 125 and 126: Indirect export and direct export a
Page 127 and 128: maintenance or the use of establish
Page 129 and 130: Government Central Exploiting Sales
Page 131 and 132: in the most advanced provinces and
Page 133 and 134: network through which the products
Page 135 and 136: Siemens or Motorola, they may have
Page 137 and 138: Chinese partners. He also began to
Page 139 and 140: orders. However, a country may also
Page 141 and 142: Germany/Switzerland China democrati
Page 143 and 144: 3.4.2.4 Conversation at the first m
Page 145 and 146: only after a certain time and even
Page 147 and 148: 3.4.3 Experiences of European Compa
Page 149: ones who atte nded a course. They s
Page 153 and 154: 4. Post-Entry Strategic Considerati
Page 155 and 156: and the other one in China. The com
Page 157 and 158: experience in operating production
Page 159 and 160: In these two cases, the companies m
Page 161 and 162: 5. References Aharoni, Y. (1966): T
Page 163 and 164: Dony, A. G. (1998): Market Entry St
Page 165 and 166: Islam, I. / Chowdhury, A. (1997): A
Page 167 and 168: Madura, J. (1993): International Fi
Page 169 and 170: Semkow, B. W. (ed.) (1995): China F
Page 171 and 172: 6. Appendix 6.1 Fact Sheet People
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