Two great, absolutely must read posts over at The Useless Tree Blog. One is “Understanding China — or not” and the other is “More on Understanding China.” Both ask whether it is possible for non-Chinese people to understand China and both answer in the affirmative:

The point is that there is no one perspective, inside or outside of a culture, that will yield uniformly valid and reliable knowledge.  Knowledge is always a product of the interaction and collision of multiple sources and perspectives.  That is why it is so important, insofar as the production of knowledge is concerned, to try to maintain as open and free-flowing an environment as possible.  Distortions and obstructions are inevitable; the only way around them is through access to more information, more analysis, more points of view.  

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If there is a problem with knowledge about China, it is less a matter of how some Americans get things wrong (which is obviously true: some Americans do get some things wrong; and at times many Americans get some things wrong); the much larger problem is the limitations on knowledge within China itself.

These are two incredibly thoughtful posts and I urge everyone to read them. 

And if you want to read more on somewhat similar issues, check out “Looking Out Airplane Windows In China Is For Grizzled Old China Hands ONLY” and “China Is Not Unique, Part I — Capitalism Reigns.

What do you think?

Though I have been a long-time regular reader of the Cal Poly MBA Trip Blog, I never considered putting it on our blogroll because it is written by a business school professor mostly as a means to interact/educate/communicate with his MBA students. On top of this, most of the posts have as many questions as answers.

Today though, I read yet another thought provoking post on the blog and started writing my own post on the same topic: China’s contradictions. Halfway through my post, I realized this educational blog with the funky name is simply too good to leave off our blogroll containing what we see as the best China blogs. Yes,  some of the posts will probably be relevant only to Professor Carr’s MBA students, but I find nearly all of the posts quite relevant to those of us seeking a better understanding of China. And is there any blog (present blog included) whose posts are relevant to all of its readers?

I should have added it long ago.

As its name implies, much of the blog focuses on an MBA student trip to China Professor Carr leads every year, and the post that pushed me over the blogrolling edge fits into that. It is entitled, Get Your Head (And Heart) Ready for China’s Contradictions. It essentially talks about some of the things the China trip MBA students can expect to learn on their China trip and how to go about engaging in that learning:

There’s a well known saying among those who write about China: “After you have been in China for a week, you think you can write a book. After you have been in China for a month, if you are lucky you might be able to muster a short article. After you have been in China for a year, you keep silent.” The point of this quote is, the more you learn about and experience China, the more you realize it has too many faces, it is too complex a place to master, and you have too much to learn. Many of you (all of us?) will return from China with more questions than answers. If so, that’s okay and natural.  It’s also, in my view, the way true education should work and is one of the ways a truly educated person learns to view and experience the world. Happily for us, our goal for this trip and course does not require us to become China experts, but to gain a deeper understanding of ourselves, the global economy and our ability to operate effectively within it.

In China CEO: Voices of Experience from 20 International Business Leaders, China attorney Norman Givant reminds us that China’s booming economic development has taken place despite the messy, chaotic, and confusing backdrop of the transformation from a communist to a socialist and market-based system. He very insightfully notes, “[Unlike many Westerners] the Chinese have no problem at all in living with contradictions. Their question is: Does it work over time? He points to Shanghai’s remarkable growth as an example. “Look out the window: you see a prosperous, dynamic city that has grown tremendously in the last 20 years, and it grew primarily by ignoring the contradictions and focusing largely on economic development.” (Page 205) Simon Keely echoes a similar tune: “China is full of contradictions. Here we are a socialist country, but it’s one of the most competitive places on earth.” Well stated. Both men clearly “get” and understand this facet of China. I don’t think this means the US is not a place of contradictions, but the China hands I call friends seem to suggest that in China the contradictions are deeper and more disturbing than most places.

For more great examples of some of the contradictions in China that will mess with your mind and tug at your heart, check out following recent Wall Street Journal and NY Times articles:

The blog makes for an excellent online course on China and I recommend it.

Oh, and the “cheap sex” part of this post’s title. I just put that in there after noticing that (like so many other blogs and websites) the word “sex” pulls in far more readers to this blog than any other. If “sex” is good, I am thinking “cheap sex” should be even better.

China’s recently stepped up effort to root out foreign companies doing business in China without being registered to do so has caused a rash of China consultants to retain the China lawyers in my firm.

From our work in forming China WFOEs for these consultants, we have learned that many China consultants are falling dangerously short in various other legal aspects of their business as well. Indeed, if we were to single out the foreign businesses in China most often guilty of underestimating their legal risks, it would be China consultants. China consultants seem to have been in China so long that they have lost sight of the fact that when push comes to shove (or as we lawyers like to say, when a deep and easy pocket needs to be found) they are the American/European/Australian company that is going to need to answer for what happened. These China hands also fail to recognize how much China has changed in the last decade and that doing business in China today is just not the same as it was five years ago. Not even close. If you are a Western consultant hired by a Western company to assist in China, you must realize that if something goes wrong for your client you will be your client’s first choice for legal redress.

What can go wrong? And what can you as a China Consultant do to prevent or ameliorate it? Overall corporate planning to protect your personal assets is an absolutely necessary first step. Beyond that however, and more specifically to China, you can do a lot to protect your client and thereby protect yourself.

We have seen the biggest problems with sourcing consultants that assist in finding Chinese manufacturers. A typical sourcing project, might go like this:

  1. Western company retains a product sourcing consultant to find the best Chinese widget manufacturer in terms of cost/quality/dependability.
  2. Consultant requests and secures sample widget from manufacturer.
  3. Consultant meets with countless Chinese manufacturers in search of the best one.
  4. Consultant recommends company Z in China to manufacture 100 million widgets.
  5. Consultant is to be paid a percentage of the manufacturing costs.
  6. Company Z starts manufacturing the widgets.

By this point, I am guessing the sourcing consultants reading this are saying, “yes,” while the China attorneys out there are already apoplectic. Let’s deconstruct this hypothetical project and note where the consultant has potentially harmed the client and needlessly taken on huge liabilities for itself.

  • The sourcing consultant agreed to find “the best” widget manufacturer. Is that best in China or best in the world? What if the widget manufacturer charges one hundred dollars a widget for the 100 million widgets, but your client’s competitor finds another widget manufacturer who will do it for ninety dollars. Are you liable for the difference? Even worse, what if your client’s competitor gets the same Chinese widget manufacturer to do 100 million widgets for ten dollars less? Do you really think a US jury is going to believe you were doing your best when your fee was a percentage of the final costs? Are you responsible for the Chinese manufacturer’s late deliveries? For the Chinese manufacturer’s bad product?  Is it clear exactly what your percentage is going to be based and have you set things up so that your client cannot just go around you? The Solution: Use a well-crafted written contract to make clear exactly what you will and will not do. Put in a non-circumvention provision to make sure you get paid.
  • If you take a sample to China and start showing it to potential manufacturers without FIRST putting in place various safeguards, you are courting disaster. The sample could be used for counterfeiting. We had a consultant call one of our China lawyers in a panic after returning from China to learn that one of the manufacturers to which he had shown a sample had already started manufacturing the product for someone else using the consultant client’s trademark which it had gleaned from the Internet. The Solution: Never show a sample or product plan or reveal your trade name(s) without first making the Chinese manufacturer sign a China-centric NNN Agreement (essentially a hopped up NDA that protects against competition, circumvention and disclosure). Chinese manufacturers tend to be quite familiar with NNN agreements and if you give them a simple and reasonable one, in Chinese, they will sign it.
  • You the consultant must do more than simply negotiate the price and delivery dates or you should at least make clear in writing that these are your only tasks. Typically, product sourcing consultants oversee the OEM contract with the manufacturer and by doing so, they face major liability issues if that contract is not up to snuff. You are the “China guy” and your client is counting on you to guide it through China’s business minefields. You are the one who is supposed to know anything and everything about what it takes to do business in China. Equally importantly, with the manufacturing of its product, your client is probably turning over to the manufacturer all sorts of critical intellectual property. Your client probably thinks that its existing patents, trademarks and copyrights will protect it in China, but a court will expect you as the China expert to know better. The Solution: Put in writing with your client that you will not be providing it with legal advice and that it will need to retain its own lawyer to draft the OEM agreement with the Chinese manufacturer. Put in writing that it is your client’s responsibility to protect its intellectual property in China and that to do so, it must register its IP in China, either through a lawyer with whom you connect them or independently).

Just remember that your client sees you as the expert at doing business in China and it is looking to you for help in all areas and if you fall short in any way, you are at risk for a lawsuit.

China consultant, protect thyself.