Author: Cynthia C. Hollingsworth, FIEx, Director Global Contracts Management
The Chinese cultural traditions of Guanxi å...³ç³» (relationships) mean that trust and harmony between the individuals are more important than the paper of the contract, and you may need to condense a high-value contract to no more than 6 pages. How do you prepare for this?
By Cynthia C. Hollinsworth FIEx, Director Global Contracts Management, Unify: Recently elected a Fellow of the Institute of Export
Nowhere else can you find more growth than in China but you must understand the Chinese culture and commit to it if you expect to succeed in business relationships. I discovered this when I first started visiting China to negotiate contracts. I quickly realized how the unique character of the Chinese is built on a very strong sense of pride in their ancient history and I needed to adapt my negotiating style to their culture.
The Chinese military general and philosopher Sun Tzu said, “The general who wins the battle makes many calculations in his temple before the battle is fought”.
I quickly learned that if you want to succeed in China, you have to make many calculations and do your homework before your embark on your journey. If you are planning to negotiate a contract in China, the following points will help you plan your journey.
Learn the principles of Chinese culture and differences between the East and the West
You need good Guanxi to be successful. It runs very deep in Chinese culture and is all about personal relationships developed through family, school, university and the workplace. It provides a framework for reciprocal favours, mutual respect and trust.
Guanxi is one reason contracts in China are generally much shorter than in the West because, to the Chinese, the contract is less about the paper on which it is written and more about the cultural traditions of trust, respect and harmony in relationships. Unlike in the West, the Chinese do not expect to have to refer to the contract during execution: they rely on Guanxi.
By maintaining Mianzi (face), you maintain honour, reputation, loyalty, dignity and respect with family, friends, society and the workplace. The Chinese are acutely sensitive to gaining and maintaining face and it is vital that you do not underestimate its importance in contract negotiations. Be prepared to make some concessions, because this will give face to the negotiator and help you win the deal.
Checklist for limiting length of contract
Based on my personal experience, I've developed this checklist. It may help you limit the length of your contract to satisfy your client's needs and still provide a basis for collaboration and protection to both parties.
It is unlikely that you will be able to use your own standard contract template, but to some extent this will depend on the bargaining power of the parties. Some companies are becoming more westernised so it is a good idea to test the water by presenting a term sheetcovering key commercial and legal points.
Because of the Guanxi, the contract symbolizes a desire to do business, so allow for the fact that negotiation may continue even after the contract has been signed, and you may need to make concessions in the future.
You can find growth in China that you will not find anywhere else in the world, but your commitment and understanding of the Chinese cultural and ethical values and China's history, will contribute to your success.
NOTE: The opinions in this article are the author's own and do not represent the views of Unify.
ABOUT THE AUTHOR
Since 2010 Cynthia has been Director Global Contracts Management for Unify (formerly Siemens Enterprise Communications). She has over 20 years' experience in international trade and negotiating contracts covering Europe, North America, Middle East and Asia. She is also fluent in French and German and was recently elected a Fellow of the Institute of Export which reflects her powerful track record and contribution to both the Institute and international trade (www.export.org.uk) While living in the USA, Cynthia was appointed Lead Subject Matter Expert for the NASBITE (North American Small Business International Trade Educators) Certificated Global Business Professional Exam (www.nasbite.org) and led the development of the trade finance domain. Cynthia is an active member of IACCM in Europe.
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