China problem solving

Our China lawyers are often called in to fix things that have gone wrong between a Chinese business and a foreign company. The style for dealing with problems in China is much different than in the West and it behooves foreigners to learn the Chinese style of dealing with problems.

If you are trying to get something important done in China, you often must rely on the Chinese side to accomplish this. The Chinese party may be a Chinese company your company has hired, a joint venture partner or an employee. But when a major problem arises, the tendency will be for all these folks to tell you: “There is a problem. We cannot do what you need us to do. It is not my/our fault. It is the fault of someone else.” This statement is usually not accompanied with any plan to take care of the issue.

How do you motivate the Chinese side to take control, do their job, and resolve the problem to get things done? The basic rules in China are as follows:

  • Never show anger. If you show anger, it will not motivate the other side to act. It will instead likely cause the other side to freeze up and refuse to act for fear things will get worse.
  • Go ahead and assign blame. The Chinese side will be very sensitive not to admit any fault for the problem. However, if the Chinese side is at fault, it is important you state this clearly. You should point out the duties assigned to the Chinese side in your contract so the Chinese side has a clear understanding of why they are at fault. With Western companies, I usually wait to assign fault until after the problem has been solved. In China, it is the opposite. It is better to assign fault at the outset.  This motivates the Chinese side to resolve the problem.
  • Rely as much as possible on human feeling and the personal connections between the parties as the motivator for resolving the issues. Make it clear some identified individual the Chinese side has come to know will suffer if the problem is not resolved. This is far more effective than an abstract discussion of what is provided in the written contract. The Chinese side is much more likely to act under the motivation of human feeling than under the abstract notion that the contract requires them to act.

These basic rules were illustrated for me in a real estate transaction on which I worked many years ago. I represented a U.S. client purchasing a substantial piece of Shanghai real estate. We were represented in this deal by a sincere but not terribly experienced Shanghai real estate agent. It was important to the U.S. client to complete the transaction before a specific date.  My client and the seller had completed all the necessary contracts and it was now the job of the Chinese real estate agent to work with the bank and the local government to close the deal.

We were contacted by the agent three days before the closing. The agent announced that all our careful plans to complete the closing would not work because the bank could not perform certain procedures over the weekend. In a manner typical of this type of situation, the agent announced: “The deal will be delayed by two weeks. It is not my fault. There is nothing we can do.” The agent offered us no contingency plan of any kind. Since we were relying entirely on the agent to perform the closing procedure, this placed us in a very difficult situation. Though both my client and I were upset, I carefully controlled my anger, though I refused to let the agent off the hook on the blame issue. I pointed out that we were all relying on the agent for the bank side of the transaction and that it was the agent’s fault for not checking with the bank in advance on the procedures to be followed. I then pointed out the tremendous disappointment and loss that would be suffered by my client (who the real estate agent had come to know) if the deal did not go through as scheduled. Then I simply stopped.

The transformation in the agent was remarkable. The agent converted from the passive giver of bad news to a dynamic problem solver. Ultimately, three of her staff were on the phones and various creative solutions were devised. As a result, on Monday evening we were drinking champagne in my client’s office instead of sending reports to his bosses at home explaining why the deal would not go through on time. This all came about because we did not show anger, and we assigned blame and we relied on human feeling as the final motivator.

How do you solve your doing business in China problems?