Can Your Contracts Safeguard Your China Business?

Written by Abdel Benkerroum

In China’s complex business landscape, where opportunities meet challenges, contracts can protect your enterprise if crafted to align with local legal and cultural nuances. At a Shanghai trade expo, a passerby could photograph your brand and register it in China as a trademark, claiming ownership under China’s first-to-file system, rendering home-country registrations irrelevant. You will then become the infringing party if you enter the Chinese market with that brand. Such oversights in China’s legal framework can jeopardize trademarks or supplier deals, making strategic preparation vital for market entry.

Why China Contracts Differ From Western Agreements

Chinese contracts are brief, reflecting a particularist culture that values relational flexibility over rigid rules. Unlike the West’s rule-bound mindset, Chinese practices prioritize adaptability to mutual obligations, fostering trust through guanxi. Since moving to China in 2013, I’ve seen concise agreements strengthen partnerships. China ranks fifth globally for contract enforcement (World Bank’s 2020 Doing Business report), but enforceability requires China-centric design.

5 Steps to China-Centric Contracts

To craft robust contracts:

• Engage a Chinese lawyer fluent in English and local laws to avoid costly misunderstandings.

• Write contracts in Chinese; because the Chinese version is what prevails in court.

• The contract should call for the application of Chinese law.

• Ensure it’s China-centric, as foreign templates fail locally.

• Designate disputes to be resolved at Chinese court where the counterparty’s assets are based.

Vague terms invite disputes; specific metrics, like "delivery to our warehouses in x location in 30 days", ensure clarity. Western contracts often misalign with China’s relational culture.

Conclusion

A well-crafted contract, blending China’s legal rigor with cultural fluency, shields your business. Embrace these strategies to thrive in China. And connect with us to book a workshop anywhere in the world to unlock China’s market potential.

Disclaimer

I am not a lawyer nor qualified to dispense legal advice. Insights are drawn from my exchanges with businesses navigating China’s legal challenges. Consult a qualified China lawyer before acting on any advice.