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Succinct "ground truth" on supplier entry and operation in China


Refreshingly succinct "ground truth" for supplier entry to, and operation within, China was provided by a co-presenter, Charles Freeman of China Alliance, at a recent conference on automotive supplier investment in China.

His observations are pertinent to any firm envisioning entry into China or continuing its operations there. We second his comments on risks to supplier Intellectual Property (IP). Remediation of those risks are the focus of our IP protection efforts. Freeman commenced his points with the "three 'knows'":

1. Know the context. Laws are only one factor in understanding a Chinese landscape.

The Chinese treat law as a thing in flux.  It is important to note that there are no penalties in Chinese law. Law is more of a guide than a set of specifics such that an agreement is a mere starting point of a relationship. "China is a culture of shame not guilt" such that it is more critical to be caught than to feel remorse.

2. Know who you're dealing with.

It is essential to understand with whom you're dealing and not attempt to impute more to the relationship than is warranted. The Chinese prize stability over intimacy or friendship. You may be friendly, forming a working relationship, but don't make unwarranted assumptions of the reach of your presumed friendship.

3. Know what your supplier wants from the transaction.

Your view of sustainability and viability may not be what they want. Do not presume that your opposite wants what you want. The Chinese love us because we say too much; learn to practice silence. You have a far higher bar to climb in learning what your opposite prizes than the reverse.

4. Don't believe everything you hear.

Businesses will often tell you "yes," while government will often tell you "no." Neither is likely true. Take what you hear as a position, an opinion, without reaction on your part. Keep working the issue; firmer positions will emerge from which you can make advantage or avoid a fault.

5. Maintain your attitude.

Have a backbone; you're not a supplicant. The best that you can expect is mutual respect. Work for it. They can lie, but you can't. Do not confront if you're lied to.

6. Beware divide and conquer.

The Chinese are good at divide and conquer, often threatening that another firm or competitor will grant the terms that the Chinese request.

7. Chinese will hit you up for your technology.

Chinese are generally scored for the investment that they attract and/or the technology that they attract. Assume that your technology will be stolen at some time. Forget attempting to try an IP case in China. You won't have any better results back home as many US courts find IP cases far too complex.

8. The value of maintaining government relations.

Build government relations into your Chinese plans from the onset. Government relations contribute directly to your bottom line, either heading off or managing government relations. Don't let your joint venture partner, even if they are the larger partner, handle this for you. Relationships can unravel and you could be left without a viable working relationship.

9. The primacy of hiring your HR manager.

The HR manager is a prime hire that ranks with your most senior Chinese hires. All future Chinese hires will owe him their job.

10. Stay active, stay involved.

Things change rapidly in China. China is not a place that you can manage at arm's length or fail to be constantly attentive in changing commercial and governmental conditions.

Gordon Housworth

InfoT Public  Intellectual Property Theft Public  


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