"I Pay China Price"

As most non-Beijing residents will tell you, the capital of the People's Republic is notorious for cabbies who will take you for a ride -- in more ways than one. I witnessed one of these schemes on the way to the airport, when our happy-go-lucky driver tried on three occasions to avoid turning on the meter, and at the end of the ride, handed us an artificially high receipt when we reached the international terminal (even after we heard and observed the meter generating a different receipt). When we challenged him on it, he told us explaining in the few words of English that he knew that there was a "higher fare for international departure". This, of course, is completely untrue. We eventually gave about a 25% haircut to his suggested price, paying the actual China price for the ride.

This experience is symbolic of much price negotiation in China. While I've found the majority of Chinese suppliers to be highly ethical, it's critically important to articulate upfront that you understand the domestic price for specific items. While many will counter with what is often referred to as a mezzanine price -- which lies between the internal China price and the world price -- it's possible to negotiate this down by staying persistent. I can't tell you how many times I've heard my wife or one of her colleagues negotiate a market price with Chinese suppliers by repeating the refrain -- either on the phone or in email -- "I buy at China price". To buy at this price, local information and China-based employees whom you trust (who will not extort money from your suppliers while acting as a "double agent") are your best allies. Often times, target costing can help as well, as can online price discovery mechanisms, such as optimization and reverse auctions (though language and cultural barriers can make these tools challenging from a distance without local -- and sometimes regional -- support capabilities on the ground).

While I wish that I had these techniques available while taking Beijing taxis, at least it is possible to draw some universal China sourcing conclusions from a $12 ride to the airport. Whether you're in a dirty Beijing taxi or negotiating a seven-figure procurement contract, start by repeating the refrain "I pay China price". And keep repeating it until you actually do.

Jason Busch

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