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China Shipyard Case As Lesson For Doing Business In China.

Posted in Recommended Reading

Every so often I read an article on some aspect of China that beautifully sums up some large aspect of China.  I just read such an article on the China File blog (written by two Caixan reporters), entitled, Shandong Shipyard’s Lesson: Don’t Rock the Bank.  This article summarizes at least part of pretty much every single litigation matter my law firm has ever handled in China.  More importantly, it does a superb job of describing how things get done in China (or don’t get done) and of the role that banks, large employers and governments can play in China litigation matters.

I strongly recommend this article for anyone doing business in China.

 

  • Michiel

    Dan, I’m confused. Can you please explain the “lesson” and/or clarify if/how and to what extent this is “common” etc…

    From what I know of “how things get done in China (or don’t get done) and of the role that banks, large employers and governments can play in China litigation matters” which is admittedly, after a mere ten years in China, very limited, this article seems to be the Exact Opposite of “how things get done in China etc…”
    The only things that strike me as “typical” are that the shipyard’s management appears (completely in style) to have signed a contract that they didn’t think was a cut-in-stone contract (just the start of on-going negotiations?) and that they cried foul when things didn’t go their way and the other party (parties) actually want to stick to the letter of the contract. No fraud here, I don’t think. Just a typical mistake (only a-typical for it being at the builder’s disadvantage) to not specify precisely what was going to be built, like tonnage, and precisely how any changes were going to be handled or not.

    What strikes me as very a-typical about all this is that both ABC and the courts (and the government behind the scenes) are actually doing “the right thing” and follow what the contract say, rather than what it does not say (and thus helping the builder disregard the contract at the advantage of jobs and local money, at the disadvantage of the “evil foreigners”).
    I started reading the article expecting something like that the builder made some ships, maybe from sub-standard steel, which promptly sank, but then ABC refused a re-fund because the customer hadn’t specified they wanted their ships to actually float. And the court then agreed with the builder. Or (ABC on behalf of) the builder kept the money without delivering the ships because the price of steel increased, cutting into profits. Or the builder (or ABC) confiscating the assets and (the local police allowing) the hostage taking of some partly or completely unrelated foreign business (people).
    But no; ABC and the Chinese court(s) and the government “follow the rules”. This does seem quite different from how things “normally” go in these cases, as evidenced by countless posts on CLB and elsewhere. Or am I completely misreading either this or previous article(s)?

    It seems the lesson (for Chinese businesses) is that the “wild-East” days are over (of flaunting the rules and relying on guanxi and government bullying of foreigners).
    Yes, I’ve seen previous CLB posts saying that things are improving in China, law-, contract-, compliance- and enforcement-wise, but these posts (and cases) are still a minority, are they not??? Or has the situation in China now improved to such an extent that this example is typical? If so, then why don’t we see (much) more of this?

    Please explain, thanks:)