The Prada Diaspora. When the Chinese Come Calling. | Chinese ...

A few weeks ago we talked about the shifting negotiating agendas in a post-crisis China. One of the big trends in 2012 will be the outflows of funds from China to the rest of the world. This is the year that private Chinese business may knock on your door.

Why are Chinese Negotiators Looking Overseas Now?

The game is changing. A perfect storm is causing Mainlanders with money to look abroad. In the old, old days, pre-2000, they couldn?t afford to and didn?t have much to offer. During the boom years (up until around 2007) they didn?t have to relocate, since the home market was a powerhouse and they knew had a lock on. From 2007 until just about now, they didn?t want to. The US was looking scary, and China was still doing great.

So what has changed?

Three things. First and foremost, China shifted industrial gears during the global economic crisis (2007-2009) away from free-market private companies back towards state owned enterprises (SOEs) ? who were the big recipients of China?s huge stimulus program. Private firms and entrepreneurs are still doing very well, but the policy shift was a not-so-subtle reminder that in China you never bet against the Party ? and the Party?s interests are growing. No one is looking at wholesale nationalization, but many Chinese people feel that private industry?s best years are behind it. Revelations that Bo Xilai?s anti-crime measures might have been little more than thinly veiled extortion, the generally high levels of corruption, and the ever widening scope of SOE activity make entrepreneurs and business owners more than a little nervous.

The second concern is that China?s economy is definitely slowing ? especially for the private sector. The big stimulus package did little to help the factories, which have been having tough times. Even if the export numbers are holding steady, manufacturers still have to contend with inflations, wage increases, labor shortages, and soft demand. Real estate investors are also bearing the brunt of Beijing?s cooling-off measures. It?s getting harder and harder for the regular rich (with limited government connections) to make an honest yuan these days.

Finally, the US is looking like it?s on an upswing. The average Zhou on the street has always had a soft spot for America ? it?s Americans he can take or leave. But as far as the country goes ? great schools, clean air, lots of food, shopping, Hollywood, NBA? The list goes on. Real estate prices are low but the GDP numbers are edging upwards and there is no more talk of a scary double-dip recession. It?s looking like the Chinese dream, and more and more Mainland parents are starting to follow their college-student child over the water to check out the situation.

What to do when a Chinese investor, client, or potential partner starts asking around.

Tips for Americans approached by a Chinese counterparty in the US:
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• 1. Happy up. It is time to start sounding positive. America has become a nation of complainers. It?s hip to be grim, and it seems that the better someone is doing the gloomier & doomier they talk. I don?t care what your politics are ? the Tea Party and Fox News crowd (who are represent a big chunk of Main Street) and the Wall St. set both sound just plain miserable, besieged, and terrified ? all the time. You may have your reasons to worry about the state of the union or fret about the future, but the apocalypse talk is going to make any Chinese investor slam on the breaks and wait until next year?or the year after that. You need to exude calm confidence from the moment you say hello until your potential partner is well out of earshot. Then you can go back to the Chicken Little talk that seems to be the new national dialect.
• 2. Talk up your strengths. Chinese investors like stability, safety, and certainty. During the relationship-building phase of the negotiation, you want to make yourself, your company, and your location seem rock solid. If you are in a place that has fallen on hard times, then talk up the opportunities to profit from the planned rebuild. Don?t flat out lie, but accent the positive. Be aware of what rings the Chinese investor?s bell ? because his wish list might be different from yours. The average Chinese investor would rather make a nice return on a sure thing than gamble big on an unknown quantity with rules he doesn?t understand. Your role in this is to be stable, well-connected, informed, and established. Chinese live and die by guanxi and connections, and his biggest fear is being on his own and ignorant. You are the solid, reliable partner who is going to show him the way.
• 3. Take it slow and build the relationship. Americans start with a transaction and build to a relationship. The Chinese start with a relationship and build to a transaction. You both end up in the same place ? a solid business relationship built on trust and respect. But you start from different places. Respect that. Americans frequently get confused by the way Chinese negotiators use the word ?relationship?, and think it?s all emotional and sentimental ? like family or friends. It?s not. They don?t have to love you, but they have to know who you are and trust you on some level. They aren?t looking for true romance, but a solid partner what will do what he says he?ll do and conduct his business in a steady, consistent manner. Deal terms and business talk will come later. They want to know who you are first.
• 4. Know what you want. Don?t wait for them to make an offer before you consider what you want from a deal. You have to give some thought to how you make money off their business. Are you looking for an investor, a partner, a customer, or a supplier? Do you want to expand to China (or are you already there)? Do you need sourcing, manufacturing, R&D? Many Americans are over-sensitive to stories they?ve heard about ?face? and ?guanxi? that they never get around to stating what their own interests are. If you wait for the Chinese side to set the agenda, you will pay for it. Take your time and feel them out ? but always know what you want, what you?ll take, and when you?ll walk away.

Stability, safety, transparency, fairness, governance.

Americans fear unemployment and decline. Chines fear chaos and marauding mobs.

I live in a place where the only American news channel is Fox, and if I didn?t know better I would think that the US is on the verge of collapse, invasion, and revolution ? all at the same time. It?s not a pretty picture ? but the reality is far better.

Think about what scares the Chinese investor. He is worried about civil unrest in the countryside, talk of corruption is commonplace, air and food are toxic, there are water shortages, and now it seems that the economy is slowing.

You live in a country that hasn?t had a revolution in 230 years and there is no chance of another one in the foreseeable future. You can walk the streets, drink the water, breather the air, and eat the food without fear for your family?s safety. Business regulations are fair and consistent. The government is relatively honest and does not interfere with your business or home life overly much. These are the things a Chinese investor cares about. He has plenty of confidence in his ability to make money if the economic and social environment will allow him to do so. You job is to make it clear that you can be part of his expansion to the US ? if the terms are right.

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Source: http://www.chinesenegotiation.com/2012/03/the-prada-diaspora-when-the-chinese-come-calling/

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