On the Importance of "Face" When Collecting on a Court Judgment

International dispute resolution attorneys lawyers

China Daily did an article the other day on how China’s courts are now going to post unpaid judgments online. It is entitled, “Court launches website showing who hasn’t paid.” A bit of background is in order.

China’s court system (and I am talking about commercial disputes ONLY) is not as bad as believed in the West. Foreign companies can sue and win against Chinese companies and they do. All the time. But winning a lawsuit and getting paid on a lawsuit are two very different things, both in China and everywhere else in the world.

Many years ago, my firm brought a cross-border lawsuit against a foreign company on behalf of about 35 mostly foreign companies. The clients would often ask me if I thought we were going to win the lawsuit and my response to that was always, “yes, we are almost certainly going to win. Defendant took your money without your approval or authorization. This is about as blatant a breach of contract as one can find. But that is not really the right question here. We are almost certainly going to win, but the real question is whether our winning in court will lead to everyone getting paid. In other words, does defendant have the tens of millions of dollars necessary to pay everyone and will the court in X country really enforce the judgment. The problem is we will not know the answer until months after we win.”

We eventually settled that case, compromising the various claims based in large measure on the uncertainty of collection.

China is notorious for being a country in which it is difficult to collect on a foreign and even a domestic judgment. Had someone asked me what percentage of Chinese court judgments actually get paid, I would have guessed around 50%.

The China Daily article claims it is more like 75%.

Now, in an effort to improve on that percentage, China’s courts are going to post online the names of all judgment creditors who have not paid the judgments issued against them. This is big. Probably really big.

Here’s what China Daily has to say about the need for this online dunning and the results it is likely to achieve:

The public can log on to and search individuals and groups to see if they have any pending obligations from civil court rulings nationwide.

Prior to the online service, members of the public who wanted to search civil cases had to submit paper-based enquiries to local courts.

“An online platform is the most direct and effective method for the public to learn the results of court rulings nationwide,” Ren Jin, a law professor with National School of Administration, told China Daily.

An individual will face moral and mental pressure and even lose employment and economic opportunities for poor credibility if he or she fails to carry out a court ruling, Ren said.

As the global financial crisis expands, it becomes more important to establish a system of credibility to prevent and resolve social and economic crises of all kinds, Ren said.

The online platform will help lower risks of market management and solve problems from the start, Ren added.

The failure of the courts to enforce verdicts on civil cases has been a significant challenge for the country’s judicial system, with many litigants possessing limited awareness of legal proceedings and refusing to fulfill their legal obligations, Jiang said.

“The fundamental reasons lie in the lack of a deterrence,” Jiang said.

“Those refusing to comply with court rulings should face heavier costs in their morality, creditability and property than the costs of an enforcement.”

The website is a prelude to a systematic improvement of the enforcement of court rulings nationwide.

Within hours of my having read this article, I found myself in a discussion with Sam Goodman on the importance of “face” in China business. Sam is a long-time China-based entrepreneur who will soon be out with a book on doing business in China. And I am betting it will be a really good one. UPDATE: Sam’s book — Where East Eats West: The Street-Smarts Guide to Business in China — is now out and it is really good!

Sam is of the view that face is critical for China business. I generally agree with him, but with caveats. First off, I do not like the word face. I do not like that word because I am not sure I understand what it means and I do not think most Westerners understand it either. It is too loaded with exotic connotations, so I prefer using everyday words like “respect” or “reputation.” Sam and I agreed on how Americans doing business in China so often get frustrated by a Chinese company’s unwillingness to admit it made a mistake. I told Sam I thought the unwillingness to admit a mistake has to be put on a spectrum in that there are definitely some Chinese who admit their mistakes and some Americans who do not.

I talked about how my law firm used to have an international dispute resolution lawyer (not from the United States or from Asia) who would always fight our senior lawyers when we would criticize his work. Most associate lawyers simply agree with whatever a partner says, but this one (this was not at my present firm) would dispute our assertions. The more he would dispute my assertions, the more I would talk about how horrible his mistakes were. It was not unusual for me to conclude our discussions with a throwaway line along the lines of “I just am really worried we are going to lose the client over this.” Our discussions were not productive. I eventually complained to my psychologist wife about this associate and her response was to ask whether this associate was incorporating my suggested changes and improving in his work. I told her that he was. She then asked me why it was so important to me that this associate essentially break down and admit to his wrongdoing and I told her I did not know. She told me to focus on the change going forward, not on the past. I started doing so with this associate and our relationship greatly improved (no surprise!) and his work continued to improve. I had learned to “let it go” and it worked. Had this been from China (or many other places in Asia), many might say that I had let him “save face.” I would say I had simply improved my management skills.

Now back to the collection of judgments in China. When I told Sam about this new online plan, we both immediately vehemently agreed that this will almost certainly be hugely effective. Sam talked again about the importance of face. I argued that this online posting of judgment creditors would work not so much because of face, but because one’s reputation is so important in China because for so many companies and businesspeople it is all they have. I said the reason for this was not so much something inherent in Chinese culture as it was an outgrowth of an undeveloped legal system. I talked about how this same sort of thing would work well in Russia. In both China and Russia, companies place huge importance on the reputation of the companies with which they conduct business because they know the court system is not a great remedy should something go wrong. Getting one’s name posted online as a someone who does not pay one’s bills is just plain bad for business. On the sorta flip side, this is why it is so critical to do your due diligence on whomever you will be doing business in those countries, like China and Russia, with less than great legal systems.

No matter what you call it, there is now increased justification for pursuing litigation against Chinese companies that owe you money.

What do you think?

18 responses to “On the Importance of "Face" When Collecting on a Court Judgment”

  1. Very insightful post, and I look forward to reading Sam Goodman’s book once it’s out. Like you, I am not partial to the term “face” and believe it has become, in its “exoticism” something more than it actually is. However, “face” does not equal “reputation” or “respect” in the way that Westerners perceive those words- it’s a high octane version. Given the attachment Chinese culture has to “face” (sorry), publicly posting bad debts and the people they’re attached to will be incredibly effective, if not a bit like police blotters in small American towns. There may be a downside to this approach, however. What happens to those who “lose face” publicly and cannot pay their bills? I think this tactic might have a potentially unsavory socioeconomic impact on a smaller scale. Suicide attempts are not uncommon in China among bosses who “lose face”-will this initiative contribute to an increase in numbers? Ditto with corruption (I can just see it now: “if you don’t publish my company name, I’ll pay you XXRMB”). Just a few thoughts, Dan. On the surface, this sounds like a smart approach- but I wonder about other impacts five years down the line.

  2. It could work well. Hopefully the people running the website will quickly update their database when people pay their obligations. It would stink to pay up and then have your name remain on the list for months or years due to an administrative failure.

  3. Great insight on China business and China general Dan.
    I think this goes back to the whole shame based culture thing in China. It reminds me of a post (either Danwei or Shanghaiist) where a government agency would have people standing outside with a camcorder to record the faces of people who showed up late to work.
    Another time, I went to Silk Street in Beijing and on the wall after the Sichuan earthquake. There was a HUGE leaderboard on the right hand side after you walk through the front door. It displayed the amount that each vendor stall had donated and ranked them.
    And then there was the whole online leaderboard of company level donations. Even at work, there was a VERY public donations chain that got passed around our department with everyone’s name and how much they donated.
    Had an interesting chat with a colleague once regarding the difference between a culture of face and a culture of honor. He thought that with “face”, it’s more about appearance. With “honor”, you would do what is “Honorable” even if no one would ever see it.
    I’m sure there’s a deeper story here about branding, asymmetric information, culture and Mao Zedong.

  4. Believe it or not, ‘face’ is an over-emphasized concept. Chinese business is rife with ‘face’ factors in the 1980s under planned economy. But now ‘face’,like so called ‘Guanxi’, has become more known to foreigners than to Chinese. Also, some Chinese from Hongkong or Taiwan who are more exposed to foreign capital may take advantage of these over-emphasized concepts to achieve their business purpose, which in turn bewilders foreign investors and make them more dependent on those Chinese from HK and TW.

  5. This probably does give increased justification for pursuing litigation because individuals and companies might be more wary of crossing you and others if a lot of names end up on a public ‘shame’ list.
    But, I also tend to believe that ‘face’ is an overblown business concept in China (while I believe that it is more integral to personal relationships) and that there are lot of the harmful people and companies out there might not care about face anyway.
    So a point that you might stress further is how this increased transparency in the judicial system will increase the potential pay off of the good ol’ fashioned background checks.
    Knowing who the cads are before the start of a transaction benefits a client more then if they realize it at the tail end when money has already been spent and/or buried.

  6. “law firm associate”
    French? Not that I know anything about your history, it’s just a stereotype about French people and defensiveness.

  7. Face, reputation, guanxi… and shame
    These concepts exist in all cultures, they are typically emphasized in analysis of traditional Chinese culture and in analyzing modern cultural elements, too. They are useful tools in understanding behavior and often thrown out to explain why someone wants you to do something… “Come on, come over and chat with my boss, give me some face here…”
    But one should remember that, given the Cultural Revolution, shame and the admission of wrongdoing or mistake remains in the minds of many a potentially deadly mistake. Even without direct thought of purges and inquisitions, a cultural habit of neither placing nor accepting blame is a survival trait for very real, relatively recent reasons.
    Social imperatives, whether they be required for respect or for moral reasons, are used by salesmen and by authorities pretty much everywhere, including China. Understanding those social imperatives, which differ from society to society, remains a key to persuasion and one that is often overlooked in China.
    Perhaps moreso in China because of resistance to government and to centralism, the legal system can certainly come up at the very end of a list of persuasive parties. It may well be challenging to get an American or mulitnational to understand, it may seem a radical idea, judgment enforcement through further litigation may seem a conservative approach, but finding out what the party fears/respects and leveraging that element remains the key. If you can do this while avoiding official sanction or action, you may find more success not only because of a saving of “face”, but because you have found what the party truly respects.
    This publication by the government will be a great tool to leverage before it happens to a party. Once official attention is drawn to its wrongdoing or intransigence, nobody can say for sure what future consequences will be engaged – but none of these potentialities is good.

  8. Great post and great news! Bravo to the Court! About “face”, it might be over-estimated and used as an excuse, however is a contemporary problem deriving from ancient Confucianism.
    I agree, on a general level, that “face” or “reputation” is very important and that it should stops “immoral behaviours”. But if this is true for the people on the streets, unfortunately is not true for politicians (all around the world) and business persons. One could say that in business and in politics it’s essential to “not get caught”!
    Anyway, should you have any interest in reading more about chinese values, I take this chance to submit to your attention one article that I have written during my first job here in China. Nothing extraordinary of course 😉
    http://www.renmenbi.com/chinese-business-values-you-need-know

  9. It’s worth noting that even some Chinese feel that some others take the notion of mianzi too far. During a discussion about the snafu the auction of the zoomorphic, bronze fountain heads, one student in disbelief about the senseless and contradictory actions by the government coordinated with a private collector to repatriate them, said with a slight tone of annoyance:”oh, it’s just because of saving face.”
    I think that there is a trend to recognize the effect within Chinese society as more open debates are fostered through the internet. Inevitably the Chinese recognize the value of more transparency in their society. (vid. Charter 08) Mianzi has been hijacked on too many occasions to coverup bureaucratic negligence. I will not be surprised if somebody invokes mianzi to justify the delayed responses and repeated outbreaks of HFMD.

  10. face(mian-zi) is not that important today. Most westerens have been told that face is extremly important to most Chinese. Well, it was correct like 5-10 years ago, but i don’t really think people today in China care about face (mian-zi), they care the on hand benefits more than face, if there is an opportunite to earn bucks, people don’t really care about face. The guan-xi is, however, still play an important role today. It’s hard to play cool if you don’t have some pulls in China.
    It’s just my point of view
    Cheers
    Chris

  11. Isn’t there some literature on the primitive quality of Guanxi, that is, connections and relationships are very important when the legal system is underdeveloped. As the rule of law progresses, the business climate begins more to resemble that of Europe and America, with litigation and contracts.

  12. Excellent post, thanks Dan.
    Face is still extremely important in China today. I have to deal with it every day at work, and have seen how it can inhibit people and hold them back and, on occasion, lead to disaster. Anyone who says it’s not important now hasn’t had to critique the work of Chinese colleagues, hasn’t had to get them out of their shell at a brainstorming session, hasn’t had to tell them they did something wrong, hasn’t had to tiptoe around the truth because the person you’re dealing with tends to break into tears when they’re afraid of looking bad.

  13. I don’t agree with richard on the importance of ‘face’. I have worked for 3 companies in a period of 10 years. Two of them are private Chinese companies. The 3rd is a multinational company. My experience is that you can always be straightforward with Chinese colleagues and tell them what is wrong with their work and where improvement must be made. I criticized the work of my colleagues and was criticized directly by my superiors too. However, working with colleagues from Sweden, Ireland and UK makes me realize ‘face’ factor seems more influential in western culture. I simply could not be straightforward with them when it comes to criticism of work. For example, once in a meeting, my Swedish colleague made a proposal which I did not agree. I said, ‘I’m afraid I don’t think it’s the best way to solve the problem’. As I was going to continue, he interrupted me and said sarcastically, ‘Then, what do you think is the best way’. His face turned grey. When I finished telling my opinion, he said,’You’re not the boss.’ I replied, ‘I am not the boss and I just gave my opinions for this meeting to discuss.’ The other colleagues were shocked by the heated atmosphere. When the meeting ended, some of them told me that the laowei was less patient and not good at accepting things like disagreement. Well, that’s just an example out of many. I know many of the readers here are laowais and may not get on well with my observations of ‘face’ factor and western culture as it has not been told in many books about doing business in the western world as it has been in the books of doing business in China.
    People tend to generalize things. I am no exception to the tendency. However, I have also worked with many laowais with whom I can be straightforward and don’t need to beat around the bush to express my disagreement or criticism; and they do the same to me.:) Actually, ‘face’ is far too over-emphasized.

  14. When “confronting” a Chinese worker, no matter whether he or she is in management or operations, it’s important to be aware of the horrible memory of “dou zheng da hui” of the Cultural Revolution and how it ripped communities apart. Frankly, Dan, even in the USA, be it in a law firm, other type of business or any congregation of humans, it’s not what you do, but how you do it, that influences people’s feelings and motivations. Your wife was right – focus on moving forward with the employee understanding how to get it right, and don’t strive to exact an admission of wrongdoing from him or her. Cheers, Todd.

  15. Criticizing anyone in any workplace can be challenging. There are many more commonalities than differences between criticizing workers/managers in China and in other contexts.
    Since this is a China blog, perhaps we should focus on the differences.
    It is clear there is some debate over the importance of saving face. Let’s take that as some variety in the importance of saving face. Saving face or preserving pride or not humiliating someone remains an important aspect of successfully providing feedback in China as elsewhere. Perhaps what differs most significantly in China is the context in which pride is measured, the cultural atmosphere, the ways in which someone can preserve or demolish pride.
    or perhaps in China vetures one tends to find less mature workers less capable of helping a manager provide criticism. It may well have less to do with the culture than it does with the subculture of foreign companies and the demographics of their workers.
    There is certainly an aspect of the foreigner which intensifies the pride question. For example, airing Chinese dirty laundry in front of a foreigner is more charged than airing that same laundry without the foreigner’s presence. And that foreigner may experience this highly charged atmosphere thinking it is distinct to China. In fact, it may only be that this foreigner is not used to being “the foreigner” and so finds himself in a different role, a role that his own culture has but that he, himself cannot play in that culture and so has little expertise at playing.
    Ex. when I was a consultant working for a foreign company in China, I was the low man on the totem pole. But since I was still a foreigner, my presence required a certain level of decorum and I was treated with a certain amount of deference. People thought I was more important than I was, but I WAS actually more important than I would have been in the same role as a native or in my own cultural context. Being aware of the change in one’s own role is probably more important than any changes in cultural context.

  16. Thanks Dan for a very interesting post. I agree that “saving face” is not necessarily unique to Chinese culture. For example, I would guess that no one likes to be screamed at by an obscenity-spewing boss in front of their friends and colleagues. I suspect that this is more or less universally true whether you are working in Beijing, Chicago, Paris, or Kabul. Setting aside the interesting academic debate about the precise definition of “face”, as a practical matter I’ve personally found that you can usually avoid serious “face” problems with Chinese people (and Americans as well) by generously applying good old-fashioned courtesy, discretion, and sensitivity. Just my personal opinion, for what it’s worth.

  17. Face or rep exists in all cultures; the only differences are the cues, the faux pas, and the rules of the game.
    A colleague of mine once told me that to transfer departments, he had to obtain 10+ signatures from different managers (his current and future bosses) as well as different HR personnel. The absurdity was not that the transfer required so many signatures, but that the order in which his transfer document had to be signed by those managers had to be correct so that the “highest-ranking (or rather, implicitly, the most powerful) manager signed last. What’s more, this started a heated argument between the managers’ secretaries/PAs on what the order should be (they all had same or similar titles or grades). As a result, his transfer was unduly delayed, and so was his project – another victim of mianzi. Kafka would be proud.

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