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Negotiating with Chinese Companies Part II: the Devil is not in the Detail
In this series of posts I am looking at themes explored by Lucian Pye in his work Chinese Commercial Negotiating Style and how they relate to negotiating with Chinese companies. Pye concludes that most Sino-American negotiations are initiated in a way that helps the Chinese side achieve its preferred strategies and tactics. My first post, Contract Preliminaries and Courtship Rituals, looked at how Chinese companies tend to control the preliminaries during what I have called the “courtship” phase. In this post we will see what Pye has to say about the Chinese tendency to prefer agreements on generalities.
Pye observes that Chinese culture traditionally shuns legal considerations and instead stresses ethical and moralistic principles. By contrast, Westerners are thought to be highly legalistic. The Chinese tend to reject the typical Western notion that agreement is best sought by focusing on specific details and concrete matters while avoiding discussions of generalities or rhetoric. The Chinese prefer to agree on general principles before dealing with details. They can, Pye says, be tenacious in holding to their principles but surprisingly flexible about details. The Chinese focus is on the “spirit” of the deal. Agreement on principles usually takes the form of letters of intent or protocols, the purpose of which often mystifies the Westerner. The Chinese attach great importance to symbols and symbolic matters. Symbols such as the spirit of the agreement have a reality for the Chinese and there is a distinct Chinese bias in favor of the publicity or “face” these symbols can generate.
The Chinese, Pye says, conceive of their business relationships in longer and more continuous terms than Westerners. They expect an agreement to set the stage for a growing relationship in which it will be proper for the Chinese to make increasing demands. A proclivity for seemingly unending negotiations can even make the Chinese insensitive to the possibility that “canceling” contracts may cause trouble in the relationship with the foreign party. From the Chinese perspective, nothing about a contract is ever final. Westerners usually think a contract will provide for a given period of fixed and predictable behavior but the Chinese look for continuous bargaining and regard a contract as suggesting an enduring relationship. For Westerners there can be a great deal of give and take before agreement is reached, but afterwards the expectation is that neither party should lean on the other to seek further advantages. For the Chinese, the very achievement of a formalized agreement, like the initial agreement on principles, means that the parties now understand one other well enough that each can expect further favors. They will therefore not hesitate to suggest changes immediately on the heels of an agreement. They tend not to treat the signing of a contract as signaling a completed agreement.
Pye advances several explanations for the Chinese tendency to seek early agreement on general principles. First, he says, it is easier to extract concessions when details are to be worked out later on. Second, agreement on principles can easily be turned into agreement on goals. This can in turn support a later insistence that all discussion of concrete issues must support these goals. Finally, Pye says, agreement on general principles can be used later to substantiate tactical claims of bad faith.
More on tactics in the next post in this series.
One final point: Pye never moralizes or suggests there is anything wrong with the Chinese approach. He merely points out how different it is from the typical Western approach, leaving readers to conclude that foreigners ignore or disregard the Chinese negotiating tactics at their own peril. This is certainly consistent with our view that one should not rush to blame the Chinese when things go wrong.
We will be discussing the practical aspects of Chinese law and how it impacts business there. We will be telling you what works and what does not and what you as a businessperson can do to use the law to your advantage. Our aim is to assist businesses already in China or planning to go into China, not to break new ground in legal theory or policy.
Source: http://www.chinalawblog.com/2016/09/negotiating-with-chinese-companies-part-ii-the-devil-is-not-in-the-detail.html
