Back when I was purchasing from Chinese suppliers, I was regularly frustrated by what seemed like irrational behaviors. I was wondering if some suppliers were just plain crazy, if they were incapable of consistency, or if they were faking it to their advantage.
For example, they would quote a price for an item. Then a price for another item, that I negotiated down. When I summed things up and I reminded them of the price of the first item, it was up by 10%… even though they knew I had written the original number in my papers!
Another example from last week: we did an inspection in Ningbo, and the buyer was not pleased with our findings. There were 7 references, 5 or which were clearly substandard in one way or another. Instead of looking for a solution about these 5 styles, the Chinese factory kept insisting that the other 2 references (which amounted to a very small quantity) were good and should be shipped out immediately.
This is what Andrew Hupert calls “a Mystique of Madness” in a brilliant post about the negotiating methods of China as a country. He contends that it is a tactic used consciously. Here are a few excerpts:
China-as-negotiator has been enshrouded in a Mystique of Madness – the notion that it will behave irrationally if refused or denied a bargaining point. Observers tend to regard China as a hair-triggered, unpredictable powder-keg that is not bound by the principles of self-interest or civilized behavior. The latest spats over Google, censorship, RMB exchange rates and international trade are all case studies of a China that cultivates an air of volatility to control expectations and wring concessions from counterparties.
Mystique of Madness is a tactic, and an effective one. It becomes even more successful when third parties carry the torch – competitors, commentators, consultants and media pundits spread dire warnings of vendettas and revenge only to have Beijing step in as the soft-spoken, harmony-seeking good guy. When it serves their interests, the Beijing party leadership is extremely flexible.
Hupert then lists the main advantages of this seemingly irrational tactic:
- The other side is confused and loses his priorities.
- The other side ends up in the position where it pushes for a concession that is in the Chinese side’s self interest.
- Negotiations can take forever, so that some key urgent points become irrelevant.
Then, how to deal with Chinese suppliers who use the “Mystique of Madness” tactic? According to Hupert:
If the bluff is called once, it loses its effectiveness and forces the negotiator to take real action. Unfortunately, that’s precisely how trade wars and international tensions escalate.
This is so right… Importers should not be afraid of being direct and asking why their suppliers seem to be inconsistent/irrational. This is much easier if the purchaser has (1) put up a document with all the specifications and got it signed by the supplier, and (2) can find records of all past communications in a written form.
But usually the buyer had better avoid voicing suspicions too bluntly. If he does, the supplier may feel that confidence is lost forever, and they may conclude that the order will probably be cancelled anyway. This is not the best circumstance to receive on-time and up-to-standard shipments…
See the original post: Negotiating in China: The Mystique of Madness
Related post: When a relationship turns sour with a Chinese supplier