Why Flexibility Is a Must in China Business

Let me start by saying that it is al-s ways dangerous to make general assessments， as there will always be cases that point to another direction. Let me also state that I believe thatf flexibility is a must to doing business in any part of the world. Therefore， my comments are always personal and on relative， averages terms.

The frequent changes in policies in regulations usually impact both Chinesei and foreign businessmen. Both have to be able to adapt. Even when a certain rule tar-r gets essentially foreign products or importf procedures， it also affects Chinese businesses， namely the importers.

In Portugal， Europe and the West in general， the concept of legal certainty and stability is very dear to the business commu-r nity and a cornerstone for business devel-t opment. It includes， in most cases， aspectst such as avoiding retroactive application off new legislation， involvement of the affected players in commenting and/or drafting thet new legislation and adaptation periods to the new Laws. How would you be able tot play Mahjong if the rules kept changing and you were not even involved or given advanced notice? The same question applies to business and investment decisions.

I believe that Chinese Authoritiess and businesses also value legal environ-c ment stability， but the fact that the opening and change of China’s economic system and its inclusion in the world economic system are relatively recent make rules and regulations more subject to change. It is to a certain point natural， butl no excuse not to improve it.

Regarding the frequent changes of opinion of Chinese businessmen， my opin-t ion is that this feeling arises mainly from two characteristics that may be attributed to different cultural interpretations of decision making and of written contracts.i

Decision making in China tends to be a collective process that involves more horizontal and vertical layers than in most of its European/Western counterparts. Con-equently， it may take longer and face more changes. I should stress that， obviously， the decision making process of a Chinese privately owned SME is substantially differentrom the one of a large scale SOE.

Furthermore， European/Western companies tend to focus its negotiationtrategies on reaching a written contract that provides legal certainty， being strictly abided by the parties or forcefully enforced by anndependent and easily accessible judiciary. Trust between the parties and their owneputations are based on their capability ofulfilling these written agreements and these are the main reasons why these instruments are so important.

This is not always the case in China where trust may depend more on personalelationships， where the written contractends to have a more “loose” interpreta-ion (it is viewed sometimes as a minimumramework of understanding and subject to change) and where access to the legal sys-em， specially in the case of a foreign SME， may be complicated and expensive in rela-ion to the values at stake.

In the end， I would say that foreign businessmen have to make an effort to understand and differentiate between different cultural approaches to negotiation and deci-ion making and bad faith tactics to avoidommitments and responsibilities. The same goes for Chinese businessmen.

In my opinion， the numbers of trade and investment flows demonstrate that mutual understanding is on the rise. This is certainly the case when it comes to the bi-ateral economic relations between Portugal and China.

I have once heard a Professor statinghat Chinese and Western businessmen are different， but have no reason to look at each other as extraterrestrials， because they are all human and all have， in the end， commonnterests and incentives. I could not agree more: if the business opportunity is there， everyone should try to overcome “business environment” difficulties. Otherwise， money will be left idle at the table.