China's Trade War Whisperer Battling Trump, One Factory at a Time

Nov. 19, 2018
A Hong Kong entrepreneur is readying Chinese manufacturers for their next move to prevent from becoming pawns in the trade war.

by Daniela Wei

U.S. President Donald Trump's $250 billion economic battle with China has run into a one-man obstacle. A trade-war whisperer working for the other side.

From a Hong Kong apartment, entrepreneur Ben Chu runs contract negotiation lessons online for Chinese factory owners and businesses to give them a leg up with American buyers. The 40-year-old is emerging as a resistance leader among small local manufacturers grappling with U.S. tariffs -- and he's beaming a clear message to his followers. China has the upper hand so get out there and cut a better deal, he tells his classes.

In the intensifying trade conflict, Chu's muscular in-your-face approach has struck a chord on the front line. He's racked up 20,000 online followers and he says more firms are asking for help. Some of his hundreds of clients, who sell goods to companies including Apple Inc. and Walmart Inc., boast of landing larger orders and of staring down requests to cut prices.

"Most importantly, I tell them the international clients need them more than they think," Chu, who was a purchasing manager in the U.S. and Europe for more than a decade, said in an interview.

The trade fight between the world's two biggest economies has businesses on both sides jostling to adjust.

China's manufacturing dominance has forced some U.S. companies to buy those goods whatever the cost, meaning price increases for American households may be inevitable. Trump is due to meet China President Xi Jinping in coming weeks after slapping levies on $250 billion of Chinese imports. Most of those tariffs are due to balloon on Jan. 1.

Chu's curriculum is a much-needed helping hand, however modest, for an army of small and medium-sized manufacturers in China that typically don't receive as much help from the government as state-owned enterprises. In America, the U.S. Small Business Administration has supported and funded small firms and startups since 1953, and associations that foster entrepreneurship abound.

After working for years at one end of the supply chain, Chu concluded that in many industries Chinese manufacturers held U.S. customers over a barrel. They just didn't have the skills or the language to turn that power into money.

So he ditched his corporate career for shirts and jeans and started helping small firms, some with annual sales of less than $1 million, sharpen their negotiation tactics. Chatty yet polite in person, the Hong Kong-born consultant gives seminars in cities such as Shenzhen, Dongguan and Ningbo, production hubs in southern and eastern China.

Trade Talks, Chu-Style

1. Be confident and seize the initiative
2. Know your customer's situation and take advantage of it
3. When asked to lower prices, talk about something else
4. Fight for a deal -- in English

"Most people in the manufacturing industry are low-profile," he said. "They make excellent products but don't know how to deal with clients. They sometimes lack confidence on how powerful they are."

Sariel Meng used to be one of them. She's an export manager for a Nanjing, Jiangsu-based maker of aluminum alloys that are subject to U.S. tariffs. Meng said the skills she learned from Chu are helping her company weather the trade dispute.

When U.S. buyers this year asked Meng's company, which has annual revenue of about $1.4 million, to help bear the cost of tariffs, she held her ground. Meng crunched the numbers on client selling prices and profit margins and reckoned there was room for maneuver. She negotiated a price discount -- but only if the customers increased their orders.

"Before taking the course, I was always worried I'd lose those clients if I pushed back," said Meng. "Now I feel we should fight for our benefits."

To be sure, there are doubts over the permanency of China's long-held role as a factory for the world. Already companies are scouting for facilities outside China, often in Southeast Asia, to avoid Trump's duties. And companies can't talk themselves out of this trade war. Slicker negotiation skills won't stave off U.S. tariffs that will soar from 10% to 25% on $200 billion of Chinese imports in 2019.

"Both Chinese manufacturers and U.S. retailers will eventually look for more business partners elsewhere," said Lu Zhengwei, chief economist of Industrial Bank Co. in Shanghai. "The damage to the relationship would be very long-term."

But even Lu recognizes the business potential in China for the kind of training Chu offers small manufacturers. "They have to learn how to do business directly with foreigners," Lu said. The digital era has given Chinese businesses direct access to U.S. buyers, reducing the need for middlemen sourcing companies. Chu's courses aim to help Chinese manufacturers bridge that divide.

Chu has set up chat groups on WeChat, the social media service that's infiltrated almost every part of daily life in China. There his followers ask for advice and course graduates share the challenges of work. Chu said he's surprised at his popularity.

Negotiating Better

Melissa Shu, one of his old students, was impressed by Chu's lessons on "multi-dimensional negotiation." He encouraged her not to just argue over price. Exploit the quality of your product, as well as payment terms, when clients want a price cut, Chu instructed.

An export manager for a Jiangsu-based maker of car lights, Shu has been travelling to the U.S. the past two months meeting clients who wanted a better deal. She offered them a 10% discount when 25% tariffs hit next year but raised the minimum amount for any order.

"Ben tells us we are able to negotiate in a stronger way," she said. "That's what Chinese manufacturers need now."

Read: How a Leather Belt Got Ensnared in Trump's Trade War With China

China's domination of exports to the U.S. spans multiple industries, from frozen tilapia fillets and mattresses to travel bags and e-cigarettes, giving America little choice over suppliers.

U.S. companies have been talking about reducing their dependence on China for years, to little effect, according to Chu.

It's a "seller's market," he said. "The reliance on China is still very heavy."

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Licensed content from Bloomberg, copyright 2016.

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