Trust in Business

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I am an associate working in the Amsterdam office of HIL. In this blog, I would like to share some of my experience of the Dutch business environment from the perspective of a Chinese lawyer.

The success of business cooperation largely depends on the trust between the partners. Knowing how to say “Ni Hao” or “Hallo” is nice way to start a business conversation, but it does not create trust. So how do parties get to trust each other?

In my perception, Chinese parties and Dutch parties use different ways to do this to become better acquainted with the counterparty.  

Dutch companies focus on the business. They start with a detailed due diligence. The results of this investigation are built this into the contract. This procedure is largely the same, whether it concerns a joint venture, purchase or distribution contract. You first want to know who you are dealing with and then how you will deal with this party. The assumption of this strategy is that, as long as the business fundamentals make sense, you will be able to cooperate.

Chinese parties focus on the relationship. The assumption here is that, provided the relationship is good, parties will find a way to cooperate with each other and make a profit. They further believe that few parties will honestly share business ideas and details without a good personal relationship. This is why they prefer to gain the trust through more private and personal communication. Of course, the due diligence report can also help them to know more about their partners, but it is not crucial.

The reasons for difference are cultural origin and legal understanding. The imperfect legal environment in China causes people to put greater trust and emphasis in personal relationships than in contracts or regulations.

Both the Chinese and the Dutch way have their advantages and disadvantages. My role is not to judge them but to help either my Dutch or my Chinese client to bridge them. This can be harder than the above explanation seems to suggest. Great and small misunderstandings lead to conflict. I am positively impressed by the Dutch willingness to adapt to Chinese expectations. Last week we assisted a Dutch client a company visit and first JV discussions in a manner which resembled Chinese business practice to a remarkable extent. Understandably, it was greatly appreciated by the Chinese counterparty. I look forward seeing more Chinese and Dutch companies do business in such a smooth manner.

Wei SheMr. Wei She is an associate working in the Amsterdam office of HIL. He specializes in Chinese related legal issues.

 

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