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Contracts or relationships? A concoction of west and east may be best

An important element of doing business in China is called “Guanxi”. Guanxi is the relationship between two people where they feel some moral obligations to help each other out. In the West, however, the contract is more important. It’s not to say relationships are not valued or irrelevant to a deal. Of course they are. But when it comes down to it, Westerns always ask, “What does the contract say?”

Despite the importance of Guanxi, when procuring from China a well-written contract is very important. Western and Eastern approaches are quite different, and having what you agreed to written on paper will circumvent miscommunication resulting from differences in business approaches and language barriers.

Additionally, a written contract, especially when it is presented in Chinese, is an innuendo to the supplier that you are the real deal. You are a real buyer or businessperson who is serious about what’s at stake. When a supplier signs a contract written in Chinese, they will think twice about giving you less than what you expected.

So my advice is build strong relationships with your Chinese supplier, be flexible, and work with them so they understand you value the relationship. Concede where you can, but, like the old adage says, “Get it in writing!”


Mike Bellamy is an Advisory Board Member & Featured Blogger at the not-for-profit China Sourcing Information Center. He is also the author of "The Essential Reference Guide to China Sourcing" and founder of PassageMaker Sourcing Solutions.

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