Some fantastic opportunities to learn about China are more and more available in the US. While in the US this month I attended a couple of sessions of the UVU Doing Business with China seminar in Utah.
First, Andrew Hupert presented a great keynote address on Guanxi. All that needs to be said/known about this can be read in his great ebook: Guanxi for the Busy American. You can buy it at Smashwords. Some highlights include:
1. Relationships come before any contract (Guanxi as Due Diligence).
2. Relationships come after all contracts and work are completed (Guanxi Best Practices).
3. Get these relationships right or have never ending frustrations (Guanxi Myths and Realities).
Second, in a follow up on this, in a break out session on working with Chinese in the US, the Chinese speaker said two things that I found very interesting.
1. There is a “misunderstanding” that Chinese don’t follow contracts. She said, this isn’t true, they just understand things differently.
2. To support this position her example was this: Chinese buyer signs a contract with the US supplier. Exchange rate changes dramatically and now the funds that were guaranteed just days prior are not longer available. Chinese client comes back and says that the contract must either be re-negotiated or cancelled. Chinese buyer is outraged that the supplier was not willing to change the order (that was already in place and financial commitments made on the supplier side). So the buyer disappeared and blocked payment.
This example was supposed to show how both important Guanxi is and that Chinese do keep contracts but just understand them differently. Everyone in the room exchanged awkward glances and I don’t think that anyone of us made the same connection that the Chinese speaker had.
It reminded me of something that my graduate professor said to me. In a moment of truth while talking about gift-giving in Thai business, she turned to me, dropped the academic façade and said something along the lines of, “It’s all just bribes, isn’t it? We can call it whatever bullshit we want. But it’s really just bribery.”
In the same vein, Chinese can call it whatever they want, but if you sign a contract and make both financial and legal commitments and contractually obligate your counterpart to do the same and then want to change because it’s not convenient for you any more that’s called: “not following a contract.”
Now sure, things change, money moves, opportunities disappear. That’s what due diligence is for. That’s the point of a contract—to confirm that each part has both what they claim to have and are willing to follow though regardless of the extenuating changes. Can true partners be flexible? Yes, to a degree. Can people with Guanxi make changes? Absolutely—but often after money is spent, you can’t just “call in a favor” from a buddy and expect a relationship (which the American partner doesn’t value nearly as much as the Chinese counterpart does) to cover those costs.