"You are a foreigner, you don't know how China works", yes, this might be true, but I do understand how business works and what our clients in the American continent expect and want.
I got told this quite a bit when I started and maybe people tell me this now but I think my minds cancels its like spam in my email inbox. I think there is only one way to do business and is the right way. A lot of this comments came up basically when I forced suppliers/factories to sign a buy and sell or manufacturing contract. From my Chinese counterparts they would tell me that contracts are useless in China. From the foreigners who have lived here for a long time I would get, surprisingly, that contract are useless in China. Both parties didn't know what they were talking about.
I got told this quite a bit when I started and maybe people tell me this now but I think my minds cancels its like spam in my email inbox. I think there is only one way to do business and is the right way. A lot of this comments came up basically when I forced suppliers/factories to sign a buy and sell or manufacturing contract. From my Chinese counterparts they would tell me that contracts are useless in China. From the foreigners who have lived here for a long time I would get, surprisingly, that contract are useless in China. Both parties didn't know what they were talking about.
This comes from the misconception that in China there is no rule of law.
The misconception comes from their experience in the inability to prosecute
when their Chinese counterpart do not comply with what was agreed upon in a
contract or verbally.
Life
in Asia is about negotiations and to be able to negotiate you have to be able
to adapt and be flexible. As +Jason Sheets, an
in-house lawyer for an American Software company puts it: “As soon as Chinese
counterpart breaches a contract most of the managers and top people in the US
want to sue. What they really should be doing is preparing for another round of
negotiations. That is what they expect you to do, but most foreigners just lock
themselves in the contract they have already signed and fail to be flexible.” He
also points out that Chinese will breach contract usually only when a situation has happened (for example, an appreciation of the RMB) and the contract doesn't benefit them anymore.
This
doesn’t mean that if you would like to make your commercial rights to be
honored there wouldn’t be a viable way to do it. By August 2012 the Chinese
courts have handled 370,000 cases, 25 % more than during that same period in
2011; as well you can see an increase in the arbitration cases with about
RMB113 billion in settlements last year, up 22 per cent from a year earlier.[1]
The number shows that there is a rule of law and that it’s gaining strength
with each passing year.
But
our recommendation: be flexible, be opened to negotiate.
But as I also told Jason, for companies like INPASIA, who basically buy products from small and mid size companies, the contract sets the tone for our cooperation. It shows them our seriousness and puts into paper everything that we expect and want. Usually the Chinese companies (even though they are small) would not sign anything that they would not be able to comply with and would change clauses to try to benefit them. In one occasion, when a delivery date was not complied with, the manufacturer paid the penalty fee agreed on the contract, and we didn't even have to go to court for that.
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