Shanghai Real Estate

SHANGHAI REAL ESTATE CASE: Questions 3 and 4

3. When doing real estate deals such as this in China, it is important to understand and be sympathetic to the following elements of Chinese business culture:

1. There is a strong emphasis on hierarchy in Chinese business culture. Therefore, it is important to bring the most senior member (i.e. CEO) of your organization to lead negotiations, especially when discussing large deals. Substituting subordinates to lead negotiations and discussion is considered an insult to the Chinese. Hierarchy is particularly important if you are a foreigner because Chinese tend to treat "outside" information with caution.

2. Humility is considered a desirable quality in Chinese business culture. Therefore, it is important not to embellish your accomplishments and to keep your ego in check.

3. The Chinese tend to extend negotiations beyond the approved deadline in order to try to gain an advantage. As a result, it is important to be a good negotiator.

Consequently, you should understand the interests of the other party at the bargaining table and also understand both parties BATNA (Best alternative to negotiated agreement). For example, in order to know whether or not to accept a proposed settlement obtained through negotiation, you must know whether or not you can get a better outcome in some other way. If the negotiated agreement is better than your "best alternative," you should take it. If it is not as good as your BATNA, however, you should either go back to the negotiating table to try again, or leave the table to pursue your other option

4. Finally, it is important to establish a close relationship with Chinese business people in order to develop trust. They put more emphasis on social ties and oral agreements as opposed to written legal documents. Therefore, you should accept the fact that the Chinese may still try to negotiate even after the deal is signed.

5. If you are acting as an intermediary between a Chinese firm and a non-Chinese firm, it is important that the non-Chinese party be cognizant of the Chinese culture and adapt their business practices accordingly. The intermediary should make demands from both parties to respect the other parties' culture.

4. First, Rosenberg should have