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The China anger test. Fast. Cheap. Amazingly accurate.

by Dan Harris in 'China Law Blog'

I was telling a client today how my law firm has done more than 200 Non Disclosure Agreements (NDA) with Chinese companies and our results very roughly approximate the following:

  • 100 Chinese companies signed what we drafted
  • 95 Chinese companies made one or more reasonable modifications and then signed
  • 5 Chinese companies angrily told our clients "this is not how business is done in China."

I went on to say that we liked the second category the best because those were the companies that took the agreement seriously enough that they did not want to sign anything with which they were not fully comfortable.

I then had a revelation. Legitimate companies do not get angry when put to the test.

Let me explain.

We are always preaching to our clients the importance of due diligence. We tell them to be sure to conduct business with only registered Chinese companies and that the best starting point for confirming whether a company is registered is to review a copy of their certificate of registration. Our clients often express concerns to us that this sort of request will offend their Chinese counterparty. Our response is that those who have the registration virtually always promptly provide it and those who do not have the registration get angry and talk of how the request is an insult. Tellingly, I cannot think of an instance where a company complained about having to provide its registration and then come up with it. In other words, their anger has always stemmed from their having gotten caught, not from the request itself.

Am I on to something here? Is anger a good measure of a party's intentions? How can it not be? What do you think?

Dan Harris is founder of the Harris & Moure law firm, a boutique international law firm focusing on small and medium sized businesses that operate internationally. China is the fastest growing area for the firm. Dan writes as a source of China legal and business information.

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