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By Root 5444 0

after more than a decade of driving reforms of state industry, legitimatizing private business, building stock markets, reorganizing Chinese banks, and building a regulatory system modeled on the U.S. Federal Reserve. As he left office, China had $400 billion in foreign exchange reserves, $850 billion in annual foreign trade, and foreign investment averaging about $150 million per day. China’s general tariff levels fell to 10.4 percent from 42.7 percent. Through the WTO and other trade negotiations during Zhu’s term as premier, China also established for the first time a system of interministry consultation. Zhu had learned his lesson in Washington. China’s top-down command system was changing when it came to business and economics. Leaders would now have to seek consensus and ministries would now have to consult with each other, draft laws would be circulated and sometimes made public to solicit opinions, and the attitude and concerns of the Chinese business community would have an increasing voice in government policy making.

What This Means for You

The two hundred years of interaction that have humiliated, infuriated, and ultimately brought China into the world community were almost entirely government-to-government negotiations. Business was often a pawn, sometimes a driver of the negotiations, but always a hostage to the strategic realities of relations with China. Nevertheless, there are valuable business lessons to be learned from the two centuries of negotiations. To a great extent, both the Chinese businessperson and the bureaucrats who can make his or her life miserable share the same prejudices, fears, and misconceptions that have been created by China’s experiences at the hands of foreigners.

Within China today much has changed, while much remains the same. What has changed most is China’s position in the world. When Macartney arrived, China was beginning to stagnate. It was an inward-facing, feudal society that had failed to understand and keep pace with global technological and economic changes. Today, China is a thriving economic powerhouse with nuclear weapons and its own space program, destined to become one of the most powerful nations the world has ever seen. But the country is still struggling with the dilemma it faced in the last days of imperial rule when foreign traders began forcing their way into China: how to adopt and adapt to the ways of the West and global commerce while maintaining the Chinese “essence.”

What can you as an executive trying to do business with China take away from the history of China’s encounters with the West? I’ll explain my observations of what it means to you by looking at two central ideas: the context in which negotiations take place, and some of the techniques that the Chinese employ.

The negotiating environment, whether government or business, is all about China’s perception of itself and foreigners. The humiliations visited on the Chinese are fresh in their memory, but so is the superiority complex that preceded the foreigners. Thus you will find yourself facing the yin and yang of Chinese suspicion and arrogance. Chinese expect to be treated differently. They want you to show deference, to recognize them as important and powerful players on the world scene. But they won’t hesitate to try to make you feel guilty for the past two hundred years if it can give them an advantage in negotiations. Not all Chinese are consumed by this history, but I have yet to meet a Chinese person who is not extremely thin-skinned if even a hint is given that you aren’t treating them as your equal or, for many, as your superior.

While proud of their ancient culture, the Chinese will pander their poverty. They love to convince you that you owe them something. They are poor, you are rich, and their poverty is your fault. They want you to help remedy this inequity with a gift, usually knowledge. The larger and more successful your company, the more they want to be given. The American WTO negotiators had a running joke that each of their negotiations opened with an “it’s-all-your-fault