China Business Success Stories just posted an interesting article entitled What Do We Mean By ‘Trust’ In China? by Frank Gallo.
Nothing really new, actually, when you consider all the business books already written about China. But it is a good summary of several important differences between China and what we call “the West”. Two parts of this article got me thinking about the implications for importers.
About written contracts:
In the West, such a document is binding between people and organizations. A Westerner trusts that if such a document exists, then both parties will do all that they can to honour it. If one party cannot honour their part of the agreement, then some form of compensation must be paid to the other party to make up for not doing what was stated. In Chinese culture however, such an agreement is often just a memorandum explaining intentions and not a binding document at all. In China, if there is a problem with the agreement, both parties will often work things out informally until there is a new agreement.
That is very true. Exporters who understand what a contract means for their customers tend to say “we’ll do our best, don’t worry”. It actually means “we understand what you want, and we’ll work in that direction, but please don’t expect any guarantee”.
Another consequence: importers should define the specifications of their product very precisely, and then stick to it. The supplier might not respect everything, and might expect some “understanding” from the buyer. That’s why importers should do all they can to confirm that the product specs are achievable in bulk production. And they should confirm the supplier’s understanding that the specs are not negotiable down the road. It is their responsibility.
About telling the truth:
Often, employees in China will sacrifice truth in order to be courteous. Both cultures are truthful and both cultures are courteous. But Westerners are more direct and therefore more willing to get to the truth at the expense of courtesy. Chinese, on the other hand, are more likely to circumvent a direct response in order to allow everyone to save face.
This is so true… I saw importers urging their suppliers to let them know if the factory notices quality issues during production. It seems to make sense: in that case, the importer can estimate the gravity of the problem, and either accept it or suggest a way to re-work the goods this time and avoid it next time. However, suppliers usually don’t respect this guideline, and big issues get caught during a final inspection. Why? Sometimes their QC systems have just not stopped the problems. Sometimes the factory workers see them but would not speak up. And sometimes the salespeople actually know about it, but they don’t pass the info to the buyer.
This is the reason why inspections should often take place during production. Yes, the supplier is supposed to keep his quality under control. But no, most of the time he can’t be counted on to do the necessary. Chinese vendors tend to hope that a final inspection will not reveal the issues, or that the buyer will be in too much of a hurry to block the shipment at the last moment.
One word of caution, though. More and more exporters are used to dealing with foreigners, and they don’t fall into these traps. The sad thing is that factory employees are not in contact with foreigners, and there is very little progress–if any–in the way they do their work.