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Role of technology and IP in Chinese business negotiation

by Andrew Hupert

Your sophisticated technology is NOT a source of power in Chinese negotiation.

American negotiators in China often make the mistake of believing that their sophisticated technology gives them leverage in Chinese business deals. Their logic is simple and irrefutable – they have something that Chinese partners and consumers want and cannot get anywhere else.

What they do not seem to realize is that once the Chinese side of the negotiating table becomes aware of the technology, then acquiring it becomes their only priority. In the US or Europe that would mean coming to an equitable agreement with the property owner. In China a negotiated agreement for technology is option 4 or 5. A Chinese business will negotiate and pay for new technology if he must – but it is certainly not his first choice.

Chinese Negotiators’ First Choice for Acquiring Technology:
So what will your new Chinese partner do to get his hands on your designs, specifications and IP (intellectual property)? Use sophisticated hacking or stealthy corporate espionage techniques? Probably not. It is much easier to just ask you nicely to explain it to them – and maybe have a few of your engineers fly in (your expense, of course) to show their Chinese counterparts how it all works. Does this really work? Yes – surprisingly often.

The myth:
Information is a scarce commodity – and if I have IP or technology that can be turned into a profitable business then I am in a powerful position when negotiating.

The reality:
The Chinese side sees IP as a temporary – almost accidental – advantage that should be acquired as quickly and cheaply as possible. It was very considerate of you to take your creative, quirky, interesting ideas and convert them to files, documents or samples – but now that you have done that then you are really not necessary any more. The negotiation is no longer about your joint business – it is about how to acquire the files or documents.

China Negotiating Power Technique 1: Wishing for more wishes
Convert your vulnerable technology to real negotiating power by using it to attract more Chinese counterparties. This takes a bit of finesse and experience, but the idea is to get potential Chinese partners to compete with one another over you. You do not have to be clever, dishonest or James Bond-ish. Simply refuse to discuss exclusivity and make it clear to each Chinese counter-party that that you plan on talking to other people.

China Negotiating Power Technique 2: Channels of distribution
If your technology is in constant development – like software or fashion – and periodic obsolescence is part of your industry, then you have a different source of power. You should focus on developing independent channels of distribution. If you can control distribution channels in China, then you have power. The second best option is to control the people who control channels of distribution.


Andrew Hupert runs ChinaSolved.com, an online platform that helps the international business community achieve greater success when doing business in China. He also writes ChineseNegotiation.com. He can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it..

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