Business With Chinese Person(S)

[GreenArrow45]

I am just wondering what people think, or would advise to be the most important things to remember when you're a foreigner/foreign company conducting business with a Chinese person/company. I am not talking about things such as buying from street vendors or places where you're bargaining along with tons of other people, but rather, when people are looking at entering into some sort of contract or business partnership.

Thanks!

[xianhua]

There are whole books written on this subject, but one point which springs to mind is this: if negotiating on Chinese soil, never reveal the date of your return flight to the other party. It sounds trivial but they may then use this date to pressure you into a last minute deal.

[roddy]

Approach with extreme caution, have everything in writing, have everything checked over by a lawyer who works for you and only for you, put as little of your money in as possible, get as much of your money out as possible, and make sure you are in some way indispensable to the business. And not in the sense of providing its running costs.

[simonlaing]

I have done some negotiations and almost opened a school with several Chinese partners. In doing business, agreeing that an idea for a business can happen very quickly, while negotiating the details and who will have what responsibilities can take awhile. So expect things to take awhile especially if you didn't know this Chinese partner before doing business together.

Practice walk-away power. Just like at the market, you have to be able to walk away all the way up to the signing of the contract. Be ready for unconventional conditions and issues to come up towards the end of doing the business. Once you start the business how it is actually managed will also be negotiated in an ongoing way. If you have more than 50% of the company make sure you or one of "your" people controls the "zhang" or stamp. Most big transactions with banks and the government requires the use of the stamp. (One reason why Chinese businessmen carry man-purses is to carry this company stamp).

Be ready for the Chinese partner to want to employ his relatives in key posts of the company. While this can help with making sure employees don't steal money, it can mean some positions are filled with not qualified or expert staff.

Don't give up intellectual property or technical drawings for less than they are worth. Back in the crazy 90s and right after China join the WTO 2001 it was not uncommon for a JV 's partner to open up a factory making the exact same type of products across the street from the JV and after the minimum period (6 months -1 year) to walk across the street with designs of most of your products. This happens less often now, but don't expect a no-compete clause in a contract to be binding or enforceable unless clear damages have occurred.

Some Chinese business people like to wine and dine prospective partners. A few unscrupulous ones may try to get you to sign a contract when you're a bit tipsy. They may also try taking you to KTV girl places or even a brothel. This is less frequent than before and most Chinese know westerners (esp, US) will not be able to take bribes or STD risks.

On the whole though, most Chinese business people are very savy and are doing business with you because there is a mutual gain and will be drawn by the future profits to do business.

Does this help? Good luck with your business. Tell us how it goes.

Simon