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I taught a 2-day workshop on Sourcing and Manufacturing in China on Sept 16-17.  This is the second time I have taught this workshop, but the first time in the US.  The last workshop was in Shanghai in April.

This time it was in Atlanta and the students were all Americans.  This was a great group of people who were anxious to learn and discuss the possibilities of doing business in China.  I was impressed with them.

More importantly, I keep learning, too.  I have started to examine the ways Chinese culture affects the Chinese manufacturing environment.   Of course, 5000 years of Chinese culture is behind everything that’s said, behind every dinner that’s hosted, behind every ride, every cola offered to you, every small gift, behind every business deal.

One of the most important things I teach my students about is the disparity between East and West cultures regarding contracts.  In the Western world, we rely on contracts to spell out the terms and conditions, expectations and approach for doing business together.  If the contract is violated; we file a law suit and go to court. 

In China, the contract should be seen as no more than a way of communicating the end-state of production.  After the contract is signed, you may be the only person to ever look at it again.  If there is a problem with production or the agreed-to terms in the contract, you are likely to be told, “this is not the way we do it in China.”  The business relationship you have with your Chinese supplier is based on “guanxi” – personal relationships – not on written legal contracts.

If you were to take your supplier or manufacturer to court (and generally, I advise against this because it is a waste of time and money), you are unlikely to get a favorable judgment.   This is because Chinese laws are immature with little precedent history.  Everything is subject to interpretation by a Chinese judge.  In the rare case you might get a favorable judgment, it is probably not enforceable.  Your Chinese manufacturer will simply go out of business.

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