Due Diligence Begins At "Ni Hao"
by Guest Author Andrew Hupert
Maybe it’s really a sign of how far China has progressed and an indication that the market is attracting a new crop of businessmen and investors that are new to this market, but lately I’ve seen a re-emergence of the “Chinese business card brigade”. Guys giving advice about how to do the two-handed business card hand-off, getting business cards printed in Chinese, making interested comments about the other person’s business cards, getting your company name translated into proper Mandarin, etc. It is invariably followed up with the usual helpful tips about banquets, toasts, connections and relationships.
Now let me ask you something:
Do you really want to start a protracted negotiation with a counter-party that would walk away from the deal because you handed him your business card with the print facing you instead of facing them?
Do you really want to rack up heavy accounts receivable from a management team that needs to get drunk with you at a banquet before they’ll consider your proposal?
How serious can you really be about a potential partner that insists you stay out until 2:00 at the morning at a KTV parlor with two 19-year-old floozies in bad evening-wear sitting on your lap?
China has grown up over the last 20 years. Maybe we should start updating our business advice.
Ok, business connections are great to have. I used to be an institutional stockbroker, and I did plenty of my biggest deals over expensive lunches in
But a lot of the westerners I talk with in China have horror stories about being ripped off, losing money and/or dealing with partners who have inexplicably become uncooperative. These unhappy endings invariably started with the western partner bending over backwards to find partners in China that wouldn’t pass due-diligence muster in international business centers.
It’s great to be culturally sensitive— and you should do your best to learn the local rules and customs. But you should also be aware that there are now plenty of local Chinese, returnees, overseas Chinese and ex-pats who are sophisticated, experienced –and are actively seeking overseas partners and investors. You would be wise to pay a little more to find a partner or consultant who understands international best practices when you are entering the market.
One of the funny little business-cultural quirks about is that there is still very little legal recourse for deals that go bad. Chundits may tell you that it’s all about harmony and fear of upsetting the group dynamics. Most Chinese judges and arbitrators will tell you that you simply should have known better than to hand over money or property without knowing who you were really dealing with and getting adequate protection up front. And they are right.
Be careful out there.
Guest Author: Andrew Hupert, DiligenceChina
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