Adapted from the Negotiation newsletter’s Negotiating in China by Ray Friedman February 2007.

If Chinese culture favors insiders, it stands to reason that outsiders face an uphill battle. 

In One Billion Customers: Lessons from the Front Lines of Doing Business in China (Free Press, 2005), business executive and Wall Street Journal bureau chief James McGregor writes of the 1996 attempt by Xinhua, the official Chinese news agency, to declare that only it had the right to publish financial data in China, thereby locking out Dow Jones and Reuters. It was a bold move based on brute power. Xinhua backed down only after Dow Jones and Reuters appealed to the U.S. government, which threatened to abandon a trade agreement with China.

The gold rush mentality in China infects locals and foreigners alike. An American executive recently told me about his negotiations to sell an insurance product to a Chinese company. He learned that the company was meeting simultaneously with another American firm that was eager to enter the Chinese market. The competitor won the deal, but with little room to make a profit.

Some might argue that you need to take chances and even accept temporary losses to gain a foothold in today’s China. Before you do, consider this advice from Carl J. Lukach, previously the director of finance for DuPont in the Asia Pacific: “Don’t do anything in China that you wouldn’t do in New Jersey.” As you adapt to culture and context, remember that the numbers must still add up for a deal to be worthwhile.

Adapted from the Negotiation newsletter’s Negotiating in China by Ray Friedman February 2007.