Key Considerations In Negotiations With Chinese Companies – OpEd

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In Turkish domestic tenders, many Chinese companies continue to secure projects by leveraging Chinese Eximbank project financing support and offering competitive pricing. While tenders for fossil-fuel thermal power plants have ended, recent news highlights plans for the production of 150,000 electric cars annually in Manisa organised industrial zone. It is noted that 2,500 Chinese workers will be employed during the production phase. But how will these workers be housed, fed, and integrated with the local community? Clearly, the processes involved are far from straightforward.

Unfortunately, our local investors and public institutions often enter such negotiations insufficiently prepared, leaving them vulnerable to Chinese negotiation tactics and frequently ending up on the losing side. So, how can this change? How can one work effectively with Chinese companies, conduct successful negotiations, and address critical points?

Key Differences in Negotiations with Chinese Firms

The belief that “negotiation tactics are universal” is widespread; however, negotiations and contracting processes with Chinese counterparts carry distinct characteristics. While we typically operate under a win-win principle, for the Chinese, contract negotiation resembles a form of “war.” They often apply strategies outlined in The Art of War, a 2,500-year-old work by Sun Tzu. Reading this book is highly recommended as part of your preparation.

The Importance of Location

Whenever possible, conduct negotiations in your own country. If this isn’t feasible, opt for a neutral third country. As a last resort, choose a Chinese city you are already familiar with. Negotiating in an unfamiliar Chinese city places you at a significant disadvantage.

Time and Concession Management

Chinese negotiators create time pressure from the outset. For example, the staff who meet you at the airport may ask, “When are you leaving?” Avoid providing a clear answer. Keeping your return date ambiguous can disrupt their tactics. Also, decline pre-signature dinner invitations, as socializing before negotiations can be risky.

Throughout negotiations, the Chinese side may repeatedly bring up new issues to wear you down. It is crucial to hold firm on your key principles. While a signing ceremony may seem enticing, never make concessions to secure it; cancel the ceremony if necessary.

Chinese Negotiation Tactics and Strategies

Chinese negotiators often request revisions at every stage, causing project delays and exhaustion. It is vital to adhere strictly to the terms agreed upon initially. Do not hesitate to cancel agreements or enforce penalty clauses when necessary.

Chinese negotiators typically have limited decision-making authority and frequently consult their senior management. Therefore, insist that decision-makers participate in the negotiations; otherwise, the discussions will be largely unproductive.

Contracting and Implementation Phases

Contracts must be drafted in English, with the English version being the legally binding one. Technical documentation should also be in English. Stand firm against continuous requests for changes and revisions. Keep in mind that negotiations will likely continue post-signature, with ongoing demands for adjustments.

Working and negotiating with Chinese companies is undoubtedly challenging. However, with a robust strategy, these processes can be managed effectively. Preparation, maintaining firm principles, and demonstrating professionalism are critical at every stage of agreements with Chinese firms. Remember: the more resolute you are, the more respect you will command. Losing ground, however, diminishes your value.

Haluk Direskeneli

Haluk Direskeneli, is a graduate of METU Mechanical Engineering department (1973). He worked in public, private enterprises, USA Turkish JV companies (B&W, CSWI, AEP, Entergy), in fabrication, basic and detail design, marketing, sales and project management of thermal power plants. He is currently working as freelance consultant/ energy analyst with thermal power plants basic/ detail design software expertise for private engineering companies, investors, universities and research institutions. He is a member of Chamber of Turkish Mechanical Engineers Energy Working Group.

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