Except it wasn’t. 

For the first three or four years the bamboo struggled to get above knee height. Then suddenly bamboo lived up to its reputation and burst forth with rapid growth. It turned out that bamboo grows fast, but not immediately. 

It is a growth story that is in many ways similar to that experienced by business when they first enter China. This doesn’t apply to simple transactional business where an order is placed for 10,000 plastic office knick-knacks selected from a suppliers catalogue. 

This growth story applies to establishing long-term business development where trust is essential. Put simply, China business does not trust Western business so, like my bamboo planting, it takes a long time for trust to grow. Building a business in or with China takes much more patience than we associate with business growth in Western markets. 

Although things have improved in China, the older hesitancy persists. Chinese courts are notoriously difficult from a Western perspective. They are also notoriously difficult from a Chinese perspective. Your China partner is just as keen to avoid becoming entangled in the court system as you are. 

The result is a much greater reliance on establishing personal trust and this takes time. We are all familiar with the importance of meals and banquets in the China business negotiation process and the way this contributes to the growth of trust. 

Trust is earned, not given without proof. In Western business trust is protected against failure with tightly written contracts. In one sense, the contract is written on the assumption that things will fail in the future. 

Chinese contracts – I’ve signed a few. “Not worth the paper they are written on,” some readers will immediately respond. And that’s true, and very false. 

Many large Chinese companies and state-owned enterprises with international operations increasingly treat Western contracts in the same way as their Western counterparts. The younger generation of business leaders are also inclined to do the same. 

However, that’s not life for SMEs where a contract may appear not to be worth the paper it’s written. This is where it’s both true and false. 

From the Western perspective, a contract is an end point – a line in the stand that represents a final decision. Any disagreement and change goes to arbitration and layers of lawyers. 

For many Chinese, the contract is a formalised starting point upon which a future relationship is based. From a Western perspective this may appear as if the China side is rewriting the contract, adding extra conditions and obligations. 

Not always, but in many cases this reopening of the business conversation takes place because you are trusted more. In many traditional Chinese business contexts, a signed contract formalises a relationship at a specific moment. It crystallises where both sides stand at a particular point in time. It is expected that the relationship will keep developing and that the contract will need to informally evolve to deal with emerging circumstances. 

In any contract situation beyond mere transactional there is a recognition that as conditions change then so too will the application of the contract. 

The base contract is a foundation of which future business can be constructed. It’s a foundation that new business opportunities will use as a reference point without the need to start a new contract from scratch. The initial contract opens a trust account and gives the China counterparty an indication of how far this trust relationship can develop. 

For many Westerners, it’s often a deeply uncomfortable approach to business. In return for contractual certainty they appear comfortable with missing out on developing opportunities. That’s an acceptable approach in largely slow-moving markets found in Europe and the US. It’s commercial suicide in fast-moving, innovative and highly-competitive markets such as China. 

Your China partner knows the China market better than you. Your China partner wants to act quickly, and take you, his Western partner, with him. A Western approach to black-letter contract conditions does 

not provide the flexibility to react at speed to market changes. 

Many businesses have found that this flexibility of response is essential to survive and thrive in the China market. How you experience this depends significantly on the company, the sector, and, perhaps most importantly, the generation with whom you are dealing across the table. 

Those nurtured in US business schools bring Western approaches to contracts. However, it’s important to understand the underlying culture because it drives the conversation around every contract. 

These are the tangled roots, which, like bamboo, provide the foundation for later spectacular growth. Good sustainable business takes time to take root in China, but when it does, the growth prospects are rapid. TQ 

BY DARYL GUPPY 

Daryl Guppy is an international financial technical analysis expert. He has provided weekly Shanghai Index analysis for mainland Chinese media for more than a decade. Guppy appears regularly on CNBC Asia and is known as “The Chart Man”. He is a former national board member of tthe Australia China Business Council. The views expressed here are his own.