27 June 2011 - 11:27am | posted by | 0 comments

How much do people cost in China and is contract worth the paper it is written on?

How much do people cost in China and is contract worth the paper it is written on?How much do people cost in China and is contract worth the paper it is

Ben Weldon, a founder of Shanghai-based design firm Thread talks about the trials and tribulations of starting a business in China in his blog for The Drum.

Before I start blogging on the day to day of a design firm in Shanghai, or things that I think the internet may be interested in, I’m going to address a couple more of the big troubles of conducting business in the middle kingdom.

Wages

In the UK wages for all levels are pretty much defined, but here I’ve given up guessing and just ask people outright, how much do you expect? I generally don’t get the answer I’m expecting.

Here’s an example from a few years ago of two people I know.

Friend A. Graphic Designer, university graduate with 2 years experience. fluent English and fluent Chinese.

Friend B. Graphic Designer, university graduate, with 2 years experience, fluent English and can just about order pizza in Chinese.

It’s worth mentioning that person B is a better designer, but he found himself at a big advertising agency bringing home £2500 a month after tax. While our local friend with her inside knowledge of the market had only just made £2400… in the whole year.

Like all things in China this is rapidly changing, there is such a huge influx of foreigners who are looking for any excuse to come and work, with the increasingly difficult visa regulations, foreign wages are dropping. On the flip side, new graduates whom have grown up in a more westernized world have a greater understanding of the industry concept, more and more of these kids talented on an international level. This with mounting employer fees are starting to level the previously mountainous bamboo forest playing field.

They Didn’t Invent Paper for Contracts

About 2000 years ago paper was invented in China, this has turned out to be pretty important. Without paper there would be no surprise with Christmas presents, buying more than one cheese burger would be hazardous and we’d have had to wait for the kindle to read books. One thing I wouldn’t have missed out on is time wasted printing contracts.

For a contract to be legally binding, it should be in Chinese, but with all our business is conducted in English and this is just a headache. You even find that Multi National Corporation's contracts are in English (I sometimes wonder if they do it on purpose). We’ve been pretty lucky, but imagine agreeing to four 25% payments at mile stones only to be told at half way through that finance will only pay at the end of the project, that you must pay the tax in advance, oh and the terms are 120 days now.

Another common scenario is that the client's big new project is cancelled due to government regulations (may as well be considered force majeure) an excuse you have little come back on, crying termination clause isn’t going to get you anywhere. I’ve not been to a Chinese business claims court, but if it’s any more complicated than a post office, I’m not going.

Our solution  is chess like project management and payment terms that would be unacceptable anywhere else.

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