How to Negotiate with Chinese Companies: How to Handle “Bluster”

Ten years ago, when one of our China lawyers would write to a Chinese company to demand it do or pay something, we usually received one of two responses:

1. No response at all. This was the Chinese company’s way of “saying” no to our demand.
2. A long rambling response from the Chinese company both denying that it had done what we accused it of having done,  but then either somewhat admitting that it had actually done it or saying that it’s own subcontractor had done it. These responses usually included a discount going forward or some really small amount as compared to the actual damage.

Starting maybe three to four years ago, when one of our China lawyers when one of our China lawyers would write to a Chinese company to demand it do or pay something, we usually received a response to the effect that “we didn’t do anything wrong and we are never going to do what you are requesting, but let’s negotiate.

Starting maybe a year or so ago, when one of our China lawyers when one of our China lawyers would write to a Chinese company to demand it do or pay something, we usually receive a response to the effect that “we didn’t do anything wrong and we are never going to do what you are requesting, and if you don’t cease accusing us of having done something we will sue in a Chinese court you for that and, oh by the way, we also are going to sue you for this other ridiculous thing that you did (even though you never did and even though it would probably be legally irrelevant if you had. And yet, they still usually then offer to negotiate or propose a low settlement amount.

At my law firm, we call this latest sort of response “bluster” and it is intended by the Chinese to scare you away, and the fact that it has become so common makes me think that it often works. But how then should you respond if you do not wish to just turn tail and run?

There are two ways to respond, one way better than the other:

1. Fight fire with fire and punch back with a slew of your own threats. This method is not terribly effective in the West and it is even less so the case in China. These “bluster” letters are designed to make you run away, but secondarily, they are designed to throw you off your game. Don’t let it. Never let the other side see you sweat.
2. Play it cool and respond very briefly and without any acrimony by making clear your position and what it will take for you not to follow through on your threat.

Negotiation 101. Andrew Hupert, my negotiation specialist friend, can you please comment on the above and the psychology behind it? Or anyone else?

We will be discussing the practical aspects of Chinese law and how it impacts business there. We will be telling you what works and what does not and what you as a businessperson can do to use the law to your advantage. Our aim is to assist businesses already in China or planning to go into China, not to break new ground in legal theory or policy.