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March 23, 2011 1 comment

How Do You Choose Your China Business Consultant ?

by Sara Cheng

China is a hot button and probably also one of the most frequent headlines of Aussie media nowadays. Coming along with this are numerous China business consultants emerging like bamboo shoots in all colours and with various language and education backgrounds. Australian businesses eager to jump onto the wagon to do business with China are surrounded and bombarded by China business seminars, conferences, summits, cocktail functions and then tracked down by all these consultants both during and after functions and events.

Are these consultants adding value or rather a worthless upfront cost for businesses?

The answer is yes and no, depending on who you work with and how you work with them.

It seems cliché but sometimes some businesses do not use common sense when it comes to choosing consultants which are critical for achieving their business success in China. Bear in mind the 3 must-have characteristics of quality China business consultants when you chose whom to work with:

China commercial experiences and capabilities: The consultant is not carrying out an academic research for you. They should be able to breathe the depth and breadth of your business, grab the essence of your situation and needs in the shortest timeframe, put this in a broad but practical China business framework and get solutions for you. China is a country full of cultural nuances and operates under a different system. Without systematic business-related education background and extensive personal commercial experiences in China, a business consultant will not be able to possess such knowledge and expertise to navigate you through the system and achieve success in China.

Chinese language skills-this is common sense. Mandarin is the official language in China. Though there are dialects and accents in various regions, especially in East China and South China, Mandarin is well understood China wide. Without this language skill, your consultant will only obtain 2nd hand (might outdated as well) information when conducting research and will not be able to communicate with Chinese stakeholders on your behalf.

Most competent communication capabilities: Your China business consultants will communicate with your potential Chinese distributors, agents, manufacturing partners, suppliers, joint venture partners, Chinese government agencies and industry bodies on your behalf. Any small mistakes in such communications may damage your relationships with Chinese stakeholders or compromise the quality of the work they do for you. Assess your consultants’ communication capabilities before you enter into a service agreement with them.

Just having a quality China business consultant cannot guarantee you succeed in China. There are 2 must-know rules to make sure you achieve the most through your competent China business consultants:

Provide genuine information they require from you: In lots of cases, ethical and experienced consultants can straightaway let you know the ideal model for you to work with China or the potential of your products/services in China if you provide them genuine and comprehensive information on your business strategy, situation and needs. If you have little chance to succeed in China, they may be able to advise you the difficulties upfront and hence save your time, money and resources to work on mission impossible.

Provide inputs, monitor milestones and work closely with them: No matter how smart and experienced your consultants are, they do not have the knowledge on your business as you do. Hence do not just leave everything in their good hands. Require progress report, communicate with them regularly, provide feedbacks, ideas and information when required or necessary so that they will refine and tailor the approach during project delivery and achieve the best they can do.

With a competent consultant and work with them in the right way, you will get the most and best out of your China business consultant and achieve success doing business with China.

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China’s New Measures on Supervision and Handling of Unlawful Contractual Practices

November 8, 2010 Leave a comment

The State Administration of Commerce and Industry (SAIC) recently promulgated the Measures on Supervision and Handling of Unlawful Contractual Practices (the Measures) , which will take effect as of November 13, 2010. The Measures aim to further regulate the entry and performance of commercial contracts, paying particular attention to how standard contractual clauses are applied by the business operators, in an effort to better protect the legitimate interests of the contracting parties.

The Measures define “unlawful contractual practices” as behaviours designed to derive illegal profits from contractual activities and in contravention of applicable laws and regulations. The Measures target three types of actions. The first is contractual fraud, meaning obtaining money or valuables by means of fabricating facts or concealing truth for the purposes of possessing money or valuables of the others. The second is seeking an illegitimate benefit by means of bribery, coercion or collusion with others using a contract. The third is to infringe upon the interests and rights of consumers by using standard contractual clauses to disclaim liability of its own and to aggravate liability on the part of the consumers.

Contractual fraud

The Measures clearly spell out the scope of contractual fraud by enumerating 10 types of prohibitive behaviours, including:

  • to fabricate fraudulent excuses for suspension (termination) of contracts;
  • to circulate or utilize false information to lure others into contracts; and
  • to maliciously include in the contracts, provisions which cannot be performed and as a result rendering the counterparty unable to perform contract obligations.

It is worth noting that anyone knowingly (or should have known) facilitating contractual fraud, such as intentionally furnishing certificates, licenses, stamps, accounts or other facilitating acts, are also punishable under the Measures.

Misuse of standard contractual clauses

According to the Measures, business operators are now prohibited to disclaim liability by adopting standard contractual clauses from:

  • personal injury to consumers;
  • property damage to consumers caused by wilful misconduct or gross negligence of the business operators;
  • warranty prescribed by law on goods and services provided by the business operators to consumers;
  • liability arising out of breach of contract; and
  • other liability prescribed by law.

The Measures further provide that business operators cannot use standard contractual clauses to aggravate consumer’s liability in respect of:

  • penalty for breach that exceeds the lawful limit or reasonable amount;
  • operational risk that should be born by the business operators who drafted the standard contractual clauses; and
  • other liability that should not be assumed by the consumers by law.

Finally the Measures list various consumer rights that cannot be eliminated by way of standard contractual clauses:

  • right to amend or terminate contract pursuant to applicable law;
  • right to claim penalty for breach by the other party;
  • right to compensation;
  • right to seek explanation of standard contractual clauses; and
  • any other rights enjoyed by consumers by law.

Based on the foregoing, some commonly seen unfair clauses or the so-called “overlord clauses” (“霸王条款”) such as “we reserve the right to final interpretation of the provisions under the contract” (“本公司拥有最终解释权”), “the products cannot be returned by customers for whatsoever reason” (“客户不得以任何理由退货”), and “tourist agency shall not be liable for the accidental personal injuries of tourists”, etc, will be caught under the Measures.

Administrative penalties

Any unlawful contractual practices caught under the Measures could render a penalty to the business operator of a fine of up to three times the illegitimate benefit, but capped at RMB 30,000.

Time for business operators to review their standard contract clauses

If business operators have been using their standard contractual clauses to mitigate their contractual liability, it is time for them to revisit and review those standard clauses to ensure they are not caught under the Measures.

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