Business Negotiations and Contracts

In Asia it is axiomatic that business is personal, and one should establish a positive personal relationship with potential business partners. The better this relationship, the easier and faster negotiations will be later. In China, once a relationship built on trust is established, the business partner becomes a “friend”.

The Chinese often communicate in an indirect manner, which is alien to many Europeans or Americans. Chinese avoid strict negation. Your business partner will not necessarily give you a direct refusal. He will paraphrase his “no” to avoid embarrassing a business partner and so that he does not have to take a final decision himself.

A note regarding the language of contract negotiations: although many managers in China speak English, many senior executives do not, and you should not assume that negotiations will be held in English.

Bring your own trustworthy and capable interpreter for important negotiations.

Chinese entrepreneurs are very price-conscious. It is quite possible that they will try to re-negotiate the price after contract conclusion or after an invoice has been issued. Conditions such as quality, price, quantity, delivery period and payment terms should be discussed and documented in detail to avoid later misunderstandings. The often poor reputation regarding payment of invoices in China should be taken into consideration for pricing. You should not rely on oral statements in this regard.

Generally speaking, contracts are also drafted bilingually in China. For official purposes, a Chinese text is always required and usually prevails. Foreign companies should be careful and make sure that such the terms of bilingual contracts are consistent. Problems arise when, for example, a lack of care results in a Chinese version with terms that are more favorable to the Chinese party. Any translation from a Chinese partner should be professionally reviewed.