How to negotiate a trade agreement in China.

• Author: Louiseize, Kelly
• Position: BUSINESS LAW

Whether a company is seeking a joint-venture partnership or attempting to go it alone, doing business in China is not for the faint at heart.

"(Trade with China) has been a slow process, but it's heating up at the present time," says a Northern Ontario company representative who has been wooing Chinese partners since 1996.

But there are a few dos and don'ts when developing a contract with the Chinese says Mark Bolger, Export Development Canada's regional manager for Asia Pacific.

In a book titled "When Yes Means NO (or yes or maybe) How to Negotiate a Chinese Deal in China," author Laurence J. Brahm states contracts should be viewed as a tool to ensure both parties understand each other. Through the document everyone knows what they have to do to make the deal work and what will happen to each party if it does not.

Between one another, the Chinese tend not use written agreements, but foreigners cannot rely on domestic ways, says Leo Seewald, lawyer with Goodmans LLP Barristers & Solicitors. He specializes in corporate commercial law, with an emphasis on foreign direct investment with the People's Republic of China.

"Do not abandon your desire to use a Western contract just because the Chinese say you cannot use that on the local people," he urges.

In saying that, however, giving Chinese partners a long-listed document may "complicate the negotiations significantly," depending on the Chinese level of sophistication, he says.

Perhaps contracts may have to come in the form of a series of purchase agreements, with each transaction as discreet as the next, he says.

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But "if a deal calls for a final agreement, then use a final agreement."

The Chinese culture focuses on the sprit of the contract rather than the words, except in areas where misunderstandings could take place, Seewald says. Contracts drafted by Chinese lawyers tend to be shorter than the average North American document. Ultimately a company adviser should have a good feel for the contract best-suited for the agreement. He says, now more than ever, Chinese business leaders want to sign a memorandum of understanding to show that progress is occurring.

China is attempting to open opportunities in certain industries. The government is picking areas of opportunity by classifying industries as restricted, prohibited, permitted or encouraged, he says.

Canada has much to offer China in raw materials, niche technology, safety and environment technology, according to...