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Q1: What are the main reasons why most foreign companies fail in negotiating a business deal in China? Q2: What are some implications that cause the foreign company to back out of a deal during the negotiating process?

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Q1: I assume that this means "fail to reach agreement". There are dozens of possible causes. Here are a few common reasons:

  • Failure to develop friendly, trusting relationships with the Chinese
  • Failure to understand what the Chinese really want from an agreement
  • The Chinese team has not developed a coherent set of demands because they have conflicts within their own team
  • There is no one in the foreign team to guide them on understanding the Chinese and / or they do not believe that they need any special counsel on the Chinese
  • The foreigners set themselves unrealistic timetables (e.g. three days in and out) to reach an agreement

Q2:

  • Unprepared for negotiating with the Chinese. Think negotiation will be more or less just like back home
  • Foreign ego - think they will out-gun, out-negotiate the Chinese
  • Lack of trust of the Chinese, and probably lack of human understanding
  • Inadequate interpreting of what the Chinese position, and / or of the foreign position to the Chinese
  • When the negotiation issues are highly political for the Chinese, then first, the foreign team needs to know that, for they are likely to stall discussions, and / or introduce new parties (especially government officials at village, county or provincial level), change their demands, etc.
  • The foreigners do have inadequate or zero professional counsel on the day to day behavior (and its real meaning) of the Chinese side
  • Not adjusting to their sojourn in China. Suffering culture shock, especially "hating the food".

My book, "The Chinese Negotiator" (Kodansha International, 2007) ISBN 978-4-7700-3028-3, contains much guidance on these questions, including twenty detailed successful and unsuccessful case studies.

Professor Bob March


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1 of 1 people found the following review useful:
Understanding Chinese Negotiators - 2007 Aug 14
Reviewer: Dr. Kevin Lance Jones (China - Beijing)

"Professor March makes some very good points. As a person that has been in Beijing doing business and negotiations for ten years in Beijing, the biggest mistake Westerners make is not understanding the Chinese psyche. I often tell my friends it is similar to living on Mars. In the "Art of War" it is said " Know yourself and know your enemies and you will win a hundred battles." Do you really understand the Chinese and what drives and motivates them? Learn this and you'll do better."
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