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Understanding Chinese Negotiation

Tuesday, August 30th, 2011
Laurence Brahm

Laurence Brahm (www.laurencebrahm.com) is a member of the United Nations Theme Group on Poverty and Inequality, a global activist, international mediator, lawyer, economist and author. He leads the way in advocating a fresh development paradigm -- The Himalayan Consensus - an innovative approach to development (see www.laurencebrahm.com). With thirty years of experience in Asia, including China, Laurence advises global corporations and regional governments. He divides his time between Beijing, Lhasa, and Dakar. He is also the author of Doing Business in China The Sun Tzu Way. Laurence gave this interview to Victor Fic (vfic@hotmail.com), our special correspondent for business and politics.

Laurence, why is Art of War a classic that is widely read in politics, strategy, and the business world?

It is a philosophy and very pragmatic guide to life, whether for business or politics. The book is foremost about war but on a deeper level about strategy which is broadly applicable to life.

Did you translate it yourself?

No, I am not a scholar. Instead, I used a Chinese text commonly available in bookstores in China. The best version is by Thomas Cleary. As a warning, James Clavel's version is lousy. I checked the various translations against the Chinese.

What qualifies you to offer advice about it?

I am a professional negotiator and mediator in China and Asia -- a three decade veteran of major multinational take-overs and mergers and other negotiations, from dealing with mafia bosses extorting money from foreign investors to complex, second track mediation between governments. I pragmatically see how its philosophy and ideas apply to life. For academic analysis of Sun Tzu and the Warring States Period, consult scholars.

You squared off against mafia bosses -- and lived?

Thuggery is common in China. During the early 1990s, cutting deals for foreign multinationals was win-win - plenty of champagne and excitement. By the late 1990s, I was restructuring these faltering deals as foreign investors bought out their Chinese partners or pulled out. By then, I mostly investigated product and document falsification and running funds into multiple bank accounts. One dead board chairman could not be found - I've said enough!

That must have disappointed you.

I did not want to change from deal maker to criminal investigator. Then the Shanxi mafia staked out my own private property in 2003, but the police only provided hotel rooms and body guards while I was locked inside with the boss for a day negotiating extortion money for peace. My manager was nearly beaten to death. Finally, we counted out the cash -- at the police office. This is normal even for many foreign investors. So when highly-paid analysts in designer shirts, ties, and cuffs give nice PowerPoint presentations about China -- I just laugh.

You insist that the Chinese strike first and hard, back away, hold the position and never compromise. Provide specific examples.

I wrote many books partly to vent these stories -- read them, please! The bad outweigh the good. Mao taught, "When the enemy is near, I am far; when the enemy runs I pursue; when the enemy is tired, I harass; when the enemy rests, I strike." For the strategic and economic dialogue between China and the US, or for a maid who wants a raise, this is the tactic. When she stops cleaning and breaks your stuff, she signals you. Foreign investors figure out the obvious, repetitive game. Sun Tzu would admonish them for losing the element of surprise.

Is the Chinese idea that relationships with outsiders are basically zero sum?

All relationships in China entail mutual exploitation. Under Mao, when people lacked money and commodities, they traded favors or power. They still do. And China today is about money as the zero sum game. Chinese "friendship" means "we do business on my terms only" or you are not a good friend.

Sun Tzu said that all warfare is based on deception. How does this relate to negotiation?

All negotiation in China and a lot of it elsewhere is based on deception, so how keen is your perception? What do you actually need? At what price? Intelligence is crucial for diplomatic and commercial negotiations. When you perceive that the other party's bottom line is not its public stance, the game changes and you can low ball the price or commodity exchange. It is all about smoke screens and mirrors to get the best outcome for yourself.

Experts also warn that the Chinese quickly see or sow division and play off factions or pitch one group against another... is this a tactic?

Anybody who claims to be a China expert is kidding himself. Even the Chinese cannot entirely understand their complex, changing nation. Yes, Chinese played off factions through their 2,000 year history. The Warring States and Three Kingdoms periods are classic metaphors for daily politics in any Chinese enterprise or level of government. So find their crack point and open up those channels. Or they will do that to you!

But many Westerners find the Chinese will unify against the outsider and conceal or heal their splits -- like a wall...

They build walls and think people cannot intrude. But their weakness is money. The Qings bribed a Ming general to pass through. As a lawyer, I advise you to never take or give a bribe. But as a writer, I will reveal the truth.

Sun Tzu said that force is second best to peaceful victory -- meaning?

Yes, using psychology to wear down your opponent and winning without him realizing your actions is ideal. But in China today, brute force is more common. People do combat in factories for a raise and in the street over a traffic slight. Sun Tzu taught patience and hiding your emotions!

How does it compare to American history?

The State Department should read my book, stop invading others, and use psychology to attain America's true interests. But American culture overly emphasizes scoring points to understand a subtle approach. I am doing a speaking tour in Washington this November to think tanks and universities. Lets see if they agree or stay focused on whether or not China will appreciate the Renminbi's value.

Do Chinese judge Westerners and especially Americans as weak and gullible in talks?

They feel superior. Partly it is cultural. China was the middle kingdom. It invented chopsticks! So leveraging this is natural.

Do the Chinese respect the West as a partner?

The Chinese paradoxically disdain and respect western culture. But following the 2008 crash, with the US economy in decay and Europe in debt, many Chinese are confident that their system is superior. It's like the Emperor Qianlong of the Qing dynasty again. When the English sought trade ties and showed the emperor their manufactured wares, the Chinese ruler replied that we have everything and need nothing from you! Let us see how sustainable it is.

How well is the Chinese way understood in the West?

The West does not understand China and vice versa -- equally -- regarding values, goals, and means. They look through stereotyped and blinkered frames. But far more younger Chinese are studying in the West and the other way around, so barriers will continue to fall.

What are the biggest errors that Western firms or governments commit in negotiations with China?

Being so naive. Timothy Geithner should read my book. China's strategy is "ge an guan huo," or "observing the fire from the other banks" by smirking at the post-2008 Wall Street crisis as signaling the death of the Washington Consensus. China feels maybe correctly that it has time that the Treasury lacks.

Where is the Chinese approach weak?

They are not naive. Their one goal is -- money. They have the most. Maybe they read the book.

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