Contracts in China: How Relationship-Based Cultures View Contractual Obligations

When you do business in China, you may come across a common contractual clause.

This clause stipulates that if issues arise, the contracted parties will discuss them and the contract may potentially be redrafted.

China is a relationship-based culture.

Someone from a rule-based culture, like most Western societies, will likely take issue with this clause.

Contracts are supposed to be black-and-white. They are supposed to be unambiguous. They are supposed to regulate specifically every aspect of the business relationship.

Contracts exist to effectively end the negotiation stage and begin working together.

The clause makes it clear that the contractual agreement may be renegotiated at any time. That means, for instance, when the parties do face a dispute, it might not go to court in the city in which the contract stipulates, but rather in a city court where the established law may work in the other party’s favor.

So, why even negotiate a contract in China? If it’s so ambiguous, what does the contract stand for?

Relationship-based Values vs. Rule-based Values

The relationship-based culture of China values a mutually beneficial and respectful business relationship. The contract is symbolic as such.

The contract signifies that personal relationships exist amongst the parties, therefore future disagreements may be negotiated.

While in Western cultures, a signed contract might mark the end of the negotiation process, in China – and in other relationship-based cultures – it marks the beginning.

You might think you’ve nailed down prices, but even those can be renegotiated days or weeks after signing.

Although those from Western cultures might see such a contract as pointless, its signing is still very important in relationship-based cultures.

In fact, it’s so important, that a contract signed with a Chinese company traditionally involves a luncheon or ceremony when making it official.

As soon as a contract is signed, it signifies that the two parties – especially the leaders – are publicly friends and will be respectful of their business relationship.

Relationships-to-Home Life

Relationship-based societies also view work life and personal life as inseparable to the point that “personal relations” and “business relations” are concepts that don’t exist in these societies.

That’s because company rules are dominated by relationships, particularly if an employee’s in-group is their family or tribe.

This means that if you have a conflict with an employee, it can often extend to a conflict with his/her family, kin, or any other member of his/her in-group.

Next week, we’ll discuss how this situation might manifest, along with other conflicts that crop up in business in relationship-based cultures.

Accepting

Last week, we talked about awareness. Awareness of culture differences throws a fork in the road: once you’re aware of differences, you can either tolerate or be intolerant toward cultural values and norms.

This is where acceptance comes in.

Acceptance plays a huge role in your cultural integration. To be successful, you must accept the culture into which you’re integrating. If you reject it, then you will ultimately fail in this foreign culture.

But, then again, there will be things you willingly accept and things you morally reject.

What Must You Accept?

A myriad of cultural values and norms must be accepted if you want to integrate into a culture. Some will be easy; others will be hard. Here are some examples.

Easy to accept:

Hard to accept:

Whether it’s adapting to the time management mantra of “it will get done when it gets done” in cultures like Nepal or India or accepting that South Koreans eat dog meat or that the French eat horse meat, you must accept that things are morally sound in some countries, even when they’re unsound in your own.

How Do You Accept Something You Morally Reject?

If you have ethical issues with the cultural norm, you can draw the line at accepting another’s culture instead of adopting it.

For example, let’s talk about headscarves. Women from Western cultures often morally reject the idea of wearing the Muslim hijab. Some see it as oppressive and as a way to control women and their human rights.

As reported by Independent, in 2016 an entire Air France cabin crew refused to fly to Iran when they were ordered by the airline chief to wear headscarves upon disembarking the flight in Tehran.

When venturing into a country like Iran or Saudi Arabia, not only might a Western woman feel uncomfortable wearing the hijab, but she might feel as though she’s complicit in what she views as oppression of women by following this custom.

If they reject this custom, then they won’t be able to do business in this country, as happened in the case of Marie Le Pen, France’s far-right presidential candidate, when she refused to wear a headscarf on her visit to Lebanon in February.

According to The Washington Post, “Marine Le Pen walked away from a meeting with Lebanon’s top Sunni Muslim leaders after she refused to wear a headscarf. The move sparked an outcry across the Arab world.”

The question is: is it worth it to spark an outcry?

You Draw the Line

As with most things, it depends on the situation and your own personal standards. YOU draw the line between what you culturally accept, what you adopt, and how far you choose to integrate into a culture.

You may come to accept things as small as greetings and time management, but those that touch upon a moral obligation will be harder to accept or adopt. It’s up to you to draw that line for yourself.

I’ll tell you how I drew my own line next week.