by Andrew Hupert
If you are arranging business deals in China, it is just a matter of time before someone tells you that A) everyone does it, and B) it is the only way to get things done in China. How can negotiators in China draw the line between cordial relationships and graft?
When the baijiu is flowing and the conversation is still light-hearted, do like the Chinese do. Know your goals, steer the conversation where you want it to go, and establish a framework for the negotiation. In China small talk is not empty talk. A good Chinese negotiator starts staking out positions, assessing your assets and maneuvering for advantage from the very first meeting. You have to do the same. Use your guanxi-building time to declare your goals, inventory their resources and capabilities, and establish limits.
Conversation in China is never as light or casual as it seems. When they ask about your family, reciprocate – and find out where their child is going to school. When they talk about travel, find out where they spend time. If someone is a civil servants but his child goes to school in California and summers in France with Mom, then you have to do the math and draw conclusions about his source of income. Make judgments about potential partners and associates early – and stick to your decision. No one gets more honest when the amount of money on the table goes up. Westerners frequently let promises of quick riches in China cloud their judgement and put them into bed with wrong counter-parties (both literally and figuratively).
If you do not know what the FCPA (Foreign Corrupt Practices Act) is, get up to speed right away. When you get caught paying bribes, either in the PRC or the US, saying, “but the Chinese middleman I just met in Beijing told me it was OK” is an admission of guilt – not a legal justification. You may not get caught, but if you do the results can be devastating to your company and to you personally. If your company has a policy on gift-giving and bribery, it is your responsibility to know it and abide by it. If your company does not have a policy, then you need to clarify your position with the relevant people at the headquarter BEFORE you get into trouble. This is a conversation to have with your own people early.
Guanxi translates as relationships or networks – not corruption. It is possible to build strong connections without bribes. The key is to select the right partners early, and communicate honestly and thoroughly. The wrong Chinese partner is going to get you into trouble by soliciting or facilitating bribes and graft. The right partner will steer you away from individuals and transactions that will cause problems.
China is much more relationship-oriented negotiating culture than the West, and it is difficult to do normal business without getting to know your counterparty on a personal level. But there is a big difference between paying for dinner and paying a bribe. All corruption in China starts as a guanxi relationship – but not all guanxi ends up as corruption. You have to know what you are getting into and establish boundaries.
Should honest businessmen avoid guanxi and personal relationships completely? Some experienced expats have recently started suggesting that Westerners in China are better off dispensing with guanxi and relationship-building efforts since foreigners do not get the same benefits as Chinese do, but can run into more problems. While this may be true, it is still a bad idea to ignore the importance of establishing cordial business relations. Good guanxi may not help you – but failing to establish a solid guanxi foundation will definitely hurt you.