Have Chinese companies screwed some foreigners? Yes, it happens, and not only in international trade. For examples, it seems like most joint-venture deals have performed poorly because the Chinese partner took advantage of the situation.

But are foreigners targeted in particular? Yes and no. Nothing is black and white.

The myth:

Some importers imagine that the Chinese have a “us versus them” mentality, and that it encourages unethical behavior in their direction. A few weeks back I found an article entitled A cautionary tale from China (h/t to China Law Blog) that echoes this feeling:

“There is an attitude among many in the Chinese business community that foreigners are rich and stupid and therefore fair game; that deceiving them is somehow acceptable in a way it wouldn’t be if they were Chinese,” says one intellectual property lawyer who has worked in China for nearly two decades.

Most people here will tell you this is wrong.

Foreigners are seen as “rich and stupid”, right… That’s why the price of the bananas I buy from street vendors is always higher than it should.

But it is wrong that “deceiving them is somehow acceptable in a way it wouldn’t be if they were Chinese”.

The reality:

In China, people from a different place are seen as outsiders. Whether you are from a different city or a different country does not make a huge difference in terms of trust (communication is a big issue, though).

A few examples:

• I have seen many Guangdong factories staffed mostly with Sichuan people, simply because the boss is from Sichuan.
• Some companies in Shenzhen only hire Hakka employees, predominantly from Meizhou city.
• And, of course, “sensitive” jobs like accounting are always given to the owner’s family members (except in large or state-owned firms).

So, why do foreigners get screwed so frequently? According to Sam Goodman, author of Where East Eats West, “It is NOT that the Chinese are out to screw over foreigners. It is simply easier to screw over foreigners.  The business environment here can be harsh even to other Chinese.”

Very true… It is much easier to take advantage of a trusting Western businessperson who does not know the local system, than it is to screw another Chinese company.

Conclusion for foreigners:

A good rule of thumb for anybody doing business in China is this:

DO NOT place another party in a position where they can screw you, benefit from it in the short term (even at the expense of the long term), and get away with it.