Long ago, The Wall Street Journal reviewed James McGregor’s book, One Billion Customers. The review had a sidebar, entitled, “Crib Sheet,” listing various tips from the book, including the following:
- The Chinese will ask you for anything because you just may be stupid enough to agree to it. Many are.
- Avoid joint ventures with government entities unless you have no choice. Then understand that the partnership is about the Chinese obtaining your technology, know-how and capital, while maintaining Chinese control.
- If you decide to sell your soul and succumb to Chinese corruption, get a good price and focus on charity work in your old age.
- Chinese Government officials can lie to you, but you must never lie to them. Exclude information, but never provide false information.
- Any tech company doing business in China should assume that its designs and products are being copied. When forced to share your technology in China, isolate the pieces from each other so that your partner doesn’t have the whole picture.
- If your boss wants to come to China to do a quick deal, lose his or her passport.
Our china lawyers have seen deals proposed by Chinese companies where our American client is being asked to send a large sum of money to a Chinese company while receiving absolutely nothing in return. When we ask our clients why they are willing to enter into such an incredibly lopsided deal, they tell us either that they misunderstood it or they just “really want to start doing business in China” It should go without saying that such deals must be avoided.
We tend not to like joint ventures with anyone, not just state owned entities (SOEs). For more on this, check out Beware the China Joint Venture.
Our advice regarding Chinese corruption is not sell your soul at all, under any circumstances. If you think your deal is worth you engaging in corruption, it is almost certainly because you are grossly overestimating the likelihood of the money you will make and/or grossly underestimating the likelihood of your getting caught and prosecuted for engaging in corruption.
I completely agree about not lying to Chinese government officials. If you get caught in a little lie, you may well be done in China. Forever.
Whenever possible, it does make sense to make sure nobody in China is getting the full picture on your product as this can be one of the most effective ways to protect your IP in China. This is just one of many things one should do to prevent copying. For more on this, check out Protecting Your IP In China.
I love the passport advice. One of our China attorneys was handling the China legal work for a client whose CEO had never before done business with China, but thought it would be easy. His more sophisticated underling thought otherwise. I sent this list of tips to the underling to show to her boss. She told me the only way her boss would really learn about the difficulties of doing business in China would be by getting burned for not listening. Therefore, instead of wanting her boss to lose his passport, she wanted him to go there as soon as possible.
These are all good tips.