When Chinese companies negotiate with their government

Internal Chinese case studies remain scarce in the negotiation domain. Most of the material available concerns business between a western company and its Chinese counterpart. In addition it is usually analyzed from the western company's perspective. The difficulty in getting access to information sources widely explains such a lack of material. The absence of Chinese researchers in this field is yet another reason. The following work aims at helping to fill in this gap. If the case that is described here aims at showing features which are particular to China, they are also met in various guises in other societies, which should allow for useful comparisons and extrapolations. For instance, the way the Chinese deal with asymmetric power relations or solve deadlocks may provide insights for negotiators working in other cultural settings when facing similar challenges. Here again knowledge transfer and cross fertilization may prove to be very fruitful.

Besides helping the practitioner to draw lessons in terms of policy, our assumption is that one can learn from China as China learns from western management, to encourage researchers to test the universality of this analytical framework and conclusions. We believe that in order to understand the complex mechanisms which govern a negotiation, it is essential to also work on non-western cases. Approaching negotiations taking place in other societies allows the researcher to keep some cultural distance, while providing new views on topics which could otherwise be considered as overly familiar.

The Chinese Enterprise as a Topic for Research

The dominating feature which characterizes the Chinese enterprise is the apparent contradiction between its market-oriented rationale and the ideological and administrative context within which it has to act. The latter is mainly characterized by remnants of a socialist society with a powerful state operating along highly bureaucratic lines (Tung 1982; White 1983; Child and Lockett 1988; Laaksonen 1988; Nee and Stark 1989; Nee 1992). The new concept of 'socialist market economy' encompasses the difficulty of combining both rationales into an integrated model.

Most Chinese companies, and especially the large ones, are state-owned enterprises which were created and developed within a centrally-planned economy. At first sight, they have a number of characteristics which do not make them ready for operating according to market rules, such as:

* lack of managerial autonomy,

* no concern for making profit,

* tendency of maximizing the company's size,

* low mobility of employees,

* low financial incentives for better performance,

(Lockett and Littler 1983; Battat 1986; Chan :1990; Child 1990).

The present economic context creates new constraints, which the Chinese state-owned company has no experience to deal with. Furthermore it is not structured in a way which could enable it to face the new challenges of a market economy. A basic requirement is primarily to achieve an organizational change to put the enterprise in a better position to fulfil its new tasks (Lee 1987; Lockett 1990; Krug 1990; Williams 1990).

One of the critical means introduced in order to help state-owned enterprises to adjust better to an economic environment characterized by uncertainty and complexity is the Contract Management Responsibility System (CMRS). The CMRS aims at setting up a kind of contractual relationship between the government and state-owned enterprises to replace the previous planned system. In the former system, the enterprise acted as a factory designed just to fulfil a set of economic objectives which were assigned by the government. Although the enterprise had to abide by the decisions of the government, there was still room for some informal bargaining on objectives. Since the economic reform, the enterprise is supposed to have more autonomy in strategic decisions such as wage policy or marketing strategy. The CMRS was designed as a critical tool to implement this orientation. Under this system, the director is supposed to have power to make most of the decisions and the right to keep a certain amount of the profits for the company itself. Meanwhile the company has to hand over a fixed amount of profit to the government every year as a kind of tax and to fulfil a few other objectives. Such a system is assumed to be subject to the principle of the separation of ownership from management. The relationship between the government and the enterprise is organized around the idea of a contract, and delegation which can be described as a kind of principal-agent relation (Yuan 1988; Yang 1990; Chan 1993).

In such a setting, negotiation becomes a new mode of relationship between the enterprise and the state although the interaction is established under a clear condition of power asymmetry. However, a real negotiation has to be performed and the reaching of an agreement between the local bureaus which are functional departments in the local government and the enterprise becomes, within the CMRS, a structural necessity.