I rarely have revelations, but after being knocked over the head countless times over the years, I finally got one regarding how Chinese businesspeople view their businesses differently from how American businesspeople view theirs.
The other day, a deal my law firm had been working on for a US company fell through, much to the consternation of nearly everyone involved. By everyone, I mean the lawyers, the accountants, and the US company. The only party that did not want the deal to go forward was the Chinese company. I am going to have to be incredibly vague here, for attorney-client and confidentiality reasons, but the main reason the deal fell through was because the Chinese company (the Chinese company is really an American-Chinese company run by a Chinese family) did not like how the American company had so little cash on hand. The Chinese company kept insisting that it did not want to give up its cash position, even though everyone else kept insisting that cash had nothing to do with the deal and that cash on hand could be equalized.
At around that same time, both Steve and I were communicating with two different Chinese companies that were owed considerable sums by US companies and both were unwilling to spend any money at all in an effort to collect those sums. Steve and I could not understand why they were unwilling to risk relatively small amounts to fund litigation to recover relatively big amounts, particularly since in both instances we believed that if these two companies did not get more aggressive in their debt collections, they would end up going under. For more on this phenomenon, check out this post, entitled, “Ranking Creditors. China Comes In Dead Last.
Then it struck me. The typical Chinese businessperson is far more protective of his or her cash and far less protective of his or her business than an American businessperson. American businesspeople frequently put in their cash into their businesses to keep it going, whereas Chinese businesspeople seem not to. I suspect the following reasons for this, but would LOVE to hear other potential reasons from you, our dear readers:
1. Americans are always talking about building a business. Businesses are run for more than just money. They are run as something to pass on to one’s children. They are run for the employees. Not saying money is not also a huge factor, but the sense I get is that it is less of a factor for an American business than for a Chinese one.
2. Americans put their lives into their businesses. Many Chinese do also, but many also are there due in large measure to their government connections and to government largess. I suspect this too plays a part.
3. Americans do not generally fear the government will shut down their business. This is less true in China.
4. Americans generally know that if they put their own money into their business and their business collapses, they themselves can declare personal bankruptcy and start their personal financial life over again. This encourages them to borrow, borrow, borrow to save their own businesses (or at least it did when borrowing was so easy). Chinese individuals have not had such ready access to credit nor is failing to pay one’s personal debts in China treated remotely like it is in an American bankruptcy.
These are the reasons why I believe Chinese businesspeople tend to emphasize cash much more than American businesspeople and why American businesspeople tend to emphasize saving and growing their business more than Chinese businesspeople.
Again, what do you think? Am I off base here? If I am right, then how does this affect how one should deal with a Chinese company?
PS I am slowly but surely gaining on the first place position in the ABA Journal law blog election and I would very much appreciate your voting for China Law Blog here. With you, it’s “Yes We Can.”

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Photo of Dan Harris Dan Harris

Dan is a founder of Harris Bricken, an international law firm with lawyers in Los Angeles, Portland, San Francisco, Seattle, China and Spain.

He primarily represents companies doing business in emerging market countries, having spent years building and maintaining a global, professional network. 

Dan is a founder of Harris Bricken, an international law firm with lawyers in Los Angeles, Portland, San Francisco, Seattle, China and Spain.

He primarily represents companies doing business in emerging market countries, having spent years building and maintaining a global, professional network.  His work has been as varied as securing the release of two improperly held helicopters in Papua New Guinea, setting up a legal framework to move slag from Canada to Poland’s interior, overseeing hundreds of litigation and arbitration matters in Korea, helping someone avoid terrorism charges in Japan, and seizing fish product in China to collect on a debt.

He was named as one of only three Washington State Amazing Lawyers in International Law, is AV rated by Martindale-Hubbell Law Directory (its highest rating), is rated 10.0 by AVVO.com (also its highest rating), and is a recognized SuperLawyer.

Dan is a frequent writer and public speaker on doing business in Asia and constantly travels between the United States and Asia. He most commonly speaks on China law issues and is the lead writer of the award winning China Law Blog. Forbes Magazine, Fortune Magazine, the Wall Street Journal, Investors Business Daily, Business Week, The National Law Journal, The Washington Post, The ABA Journal, The Economist, Newsweek, NPR, The New York Times and Inside Counsel have all interviewed Dan regarding various aspects of his international law practice.

Dan is licensed in Washington, Illinois, and Alaska.

In tandem with the international law team at his firm, Dan focuses on setting up/registering companies overseas (via WFOEs, Rep Offices or Joint Ventures), drafting international contracts (NDAs, OEM Agreements, licensing, distribution, etc.), protecting IP (trademarks, trade secrets, copyrights and patents), and overseeing M&A transactions.