Apr 25, 2012

Of Beads and Streams

Imagine: you get a quote from a Chinese manufacturer and place a P.O. Everything is in writing; the price, payment terms, every special requirement you can think of to make the product down to the tiniest detail, and more. Your Chinese supplier says they’ll deliver the order in 45 days. Everything sounds good, and you move onto the next thing.

Or not.

A week later, your Chinese supplier comes back and says, “We need a little price increase.”

“What?” you ask in frustration. “We just signed a deal and you’re already changing it?”

“Factory can’t make product to your price; they found X detail in your drawing and it will cost more,” they explain.

“Why didn’t you look more carefully the first time?”

“Factory just now studied the drawing in detail.”

By now, steam is pouring out of your vents; you want to brain them for incompetence.

In our Western culture, once we sign on the dotted line we expect no changes to the deal. If our supplier made a mistake in calculating the price, it’s their problem. If it’s a company we’ve dealt with for years we might work something out where we take a little of the increase, but in general most of us expect our suppliers to keep their word.

But what just happened isn’t necessarily about incompetence, but the differences between East and West.

Roderick MaCleod, a businessman who spent years in China explains it best:

“Westerners are offended when they have signed a contract, sometimes with elaborate ceremony and some Chinese champagne, and immediately after, sometimes over the champagne, the Chinese start talking about bending the terms a little. Apparently, Chinese see life as a flowing stream and we see it as a string of incidents, much like a string of beads. We finger one, finish with it, and want to have it tidily counted off so we can go on to the next; they see every incident and personality as simultaneously blending into each other before and after, and so nothing ever ends. This view comes out of the whole context of Eastern philosophy—in China, the Buddhist and Taoist philosophies in particular. With Westerners’ impatience, individualism, and transaction-focused attitudes—and Chinese patience, familial, and pattern-focused attitudes—most clashes of these different philosophies end badly. When the Chinese attitudes prevail, it can be for the best; on three occasions, I followed my Chinese counterparts’ willingness to continue in an apparently lost cause, and the perseverance paid off in a retrieved opportunity.”1

Recently, I submitted a product for a quote to one of my Chinese partner companies. After discussing it with several factories, they said they couldn’t source it. I thought the project was dead, until, a week later, out of nowhere they came back with a quote.

In many cases our Chinese suppliers are not trying to pull a “bait and switch,” but are moving in the flow of how business is done over there.

Part of my role is to explain both sides to each other. Just as I try to educate my customers on the differences in the way the Chinese do business, I sometimes do the same at the other end, reminding my Chinese partners that it’s important for the factories to keep their words the first time. I’ve learned that asking as many questions as possible in the beginning can head off frustration from both sides in the future.

1 – China, Inc., by Roderick MaCleod

U.S. – China Free Trade Agreement?

Reuters recently reported that China is interested in discussing a free trade agreement with the U.S. That’s one article I didn’t expect to read. China has a lot of stiff duties set up that make imports expensive there, undoubtedly to encourage joint-venture manufacturing operations as opposed to bringing in product from other countries.

Such an agreement might head off future trade war bills on currency or other issues, as well as having the effect of lowering duties of Chinese products purchased by U.S. companies.

However, the article quotes one executive as saying that “it would take 10 years to negotiate a free trade agreement with China due to the complexities involved.”
It will be interesting to see whether a U.S.-China free trade agreement gains traction.

The Exchange Rate

Yuan to the dollar, as of today: 6.31 to 1
Rate when the Yuan was depegged from the dollar on June 19, 2010: 6.82 to 1
Change: .51 (7.4%)

About Us

Since 1991, Global Trade Specialists, Inc. has helped companies of all sizes get their products made in China from manufacturers of quality products. We are an American company who works with three trading groups in China with immediate access to thousands of manufacturing companies. We source most products made from metal, plastic, wood, stone, glass or textiles; from prototype to production. Many of our customers are first time importers; we walk you through the entire process.

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