Originally from Business Disputes In China - 3rd Edition

As in any country good preparation is the secret to avoiding disputes in China. Investors should make certain the project is economically viable and then choose their business partners very carefully. However even in the US business world, where parties have a common culture and language, communication problems and disputes can be an inevitable consequence of working with others. In the Chinese business world the use of a trusted third party “zhong jian ren” is one of the key elements of negotiation and mediation. Acting through an intermediary the parties can save face “mianzi” and social relations “guanxi” should the negotiations fail or disputes arise. The risk of confrontation is much reduced by minimising direct face-to-face communication by the negotiating parties.1 Communications through a trusted intermediary or “mediator” also reduces the need for emotional responses which may create potential conflict.

Different cultures view the purpose of negotiation differently; a good example of this is the contrasting views of what a contract represents. The goal of most US negotiations is to walk away with a binding written contract containing the terms of the agreement. In Asia however the contract is often regarded as merely a framework, which guides the relationship between the parties. The relationship is the agreement not the contract. So the key to on-going business dealings is the interaction within the parties’ relationship. This can lead to disagreements as non-Chinese may have great difficulty in accepting what appears to be a process of perpetual negotiation.