A Question of Customs

By Khor, S. K. | PM Network, April 2006 | Go to article overview

A Question of Customs


Khor, S. K., PM Network


Cultural differences shouldn't stop foreign organizations from pursuing projects in China, but they must go in prepared. BY S. K. KHOR, PMP

Companies shouldn't be put off by the myths surrounding project work in China. You don't have to speak Chinese or work for a multinational corporation with a long local presence to secure business deals in the country. Be prepared for differences in the way business is conducted, however. Terms and conditions that may seem unusual in your country are often longstanding traditions embedded in the Chinese business environment.

Companies must understand what goes on behind the procurement process, says Wang Yi Ping, a senior project business director at the China Electronic EngineeringDesign Institute, Beijing. "In China, it is prudent for the contractor to find out how the customer intends to source the project funding, the bidding approach and processes, and the contracting models." Most importantly, the contractor must find out the composition oi the evaluation committee and the criteria lor evaluation right up to the signing of the contract, he says.

Different projects will warrant different techniques. For example, when dealing with China's IT infrastructure system, national policies could dramatically affect the overall project strategy and direction. The request for proposals for a national airport project includes clauses that restrict participation by foreign companies or insist on the transfer of technology from the foreign partner to a local Chinese party.

The funding source is a crucial piece of information, because it can have direct influence on procurement, says Jack Yang, CEO of Groupwise Technology, Beijing. Some funding sources stipulate that only a local company with a certain amount of capital can participate, while others prefer international participation. Sometimes currency of transaction is mandated-and more often than not it's RMB.

In addition to the project team, there is a procurement committee, which normally comprises prominent personnel who are not part of the organization. Their identities are only revealed much later, and a prior relationship or goodwill-quan xican affect the outcome of the bidding.

Negotiation Tactics

Top-down decision-making is the norm in China, and contractors unfamiliar with Chinese negotiation may find the process complex and unconventional. …

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