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How to handle a Chinese-style investment deal

George Blacklock

Chinese direct investors are now a major force in the Western market. Following a long period of vigorously seeking finance from overseas to build up its manufacturing industries, China is now investing a greater amount in Western businesses.

But before you consider doing deals with Chinese executives, it will help to have an insight into their focus and alternative negotiating style, according to Lia Ma, Jeanne Brett, Hao Wang and Zhi-Xue Zhang, writing for MIT Sloan Management Review.

The authors – business academics from the USA and China – have studied and analysed 15 years of Chinese high-profile outbound investments, confirming the country’s shift away from big, fundamental projects at home towards moderate growth overseas.


The Chinese are increasingly drawn to business concerns where they lack expertise, such as top-quality food production. Middle- and high-income Chinese consumers are now demanding high-end products from more developed economies where food health and safety is better regulated.

China’s response to this demand is to buy Western food companies. A good example is Shuanghui International Holdings Ltd’s acquisition of pork producer Smithfield Foods Inc of Virginia, USA.

Even when their product quality is high, Chinese companies understand that many of their brands are not yet established in global markets. They are shopping for opportunities to combine Chinese manufacturing capabilities with internationally recognised brands by buying out established Western companies. Pearl River became the world’s leading piano manufacturer by purchasing Ritmüller and taking a large stake in Schimmel.


So how can you ensure you get the best outcome as a Western leader at the Chinese negotiating table?

1) Expect a more aggressive stance. Harmony is low on the agenda for Chinese executive negotiators. Their principle concern is to get the best deal, rather than to charm their Western counterparts.

2) Don’t bank on mutual trust. The Chinese negotiator will keep their interests and priorities close to their chest rather than sharing, and they expect you to do the same. Trust is earned rather than assumed.

3) Be ready for self-interested, multiple-issue offers. The hidden subtext of a Chinese executive’s offer is designed to give an insight into priorities and concerns. Be equally bold in the counteroffers you make.

4) High priorities are non-negotiable. While executives will give way on low priorities, there will be no compromise on high-priority issues. Adopt a similar strategy.

5) Track the offers and counteroffers. Record them in a matrix form so that you can easily identify the issues that are more or less important to the Chinese negotiator and haggle accordingly.

As Chinese investment in the West continues to grow, it makes sense to be prepared for potential opportunities. Understanding the negotiating culture will give you a head start.

Source Article: Negotiating With Chinese Investors
Author(s): Li Ma, Jeanne Brett, Hao Wang, and Zhi-Xue Zhang