China, a global economic giant, has implemented many policies in recent years to open its doors to foreign investors and businesses. Many companies in North America and Europe are starting to conduct business in China, such as in the forms of contract arrangements and joint ventures. This article will share some of the tips on contract negotiation in China, including strategic preparation, cultural awareness, and key considerations of joint venture.

Strategic Preparation

In order to become or remain competitive in China, companies should be familiar with China’s national, statewide, and local foreign policies. This may include, but not limited to, encouraged business sectors, tax relief, and relaxed foreign exchange restrictions. Companies may want to explore beyond just the first tier city, but look into opportunities to enter second or third tier cities, as local government at these cities might have more advantageous policies that benefit foreign companies and foreign invested companies.

Cultural awareness

The fundamental to closing all business deals is to know your counterpart. Chinese typically view contract negotiation as the beginning of a long-term partnership. Instead of a one-time business transaction, the negotiation process provides the framework for building relationships and ensuring ongoing cooperation. The western style is typically task oriented and timeline based. Chinese style, on the other hand, tends to be more personal by taking into account of practical matters instead of absolute contractual terms. This, therefore, makes relationship building an essential part of reaching a deal successfully.

Joint Venture

The Chinese government has implemented many foreign policies in past years in order to encourage economic growth. However, there are still many regulatory restrictions that apply to both wholly owned foreign subsidiaries and Sino-Foreign joint ventures. It is important to retain competent international law counsel to determine key aspects such as business section categorization (restricted, encouraged, and permitted), regulation of foreign investment, tax planning, repatriation of profits and foreign exchange, and potential impact of new Chinese draft law on foreign investments.

Alpine Law specializes in handling international contract negotiations and joint ventures in China. Please contact us for a free legal consultation for your business needs.