China Business

Social Pressure Corruption in China or Downfall by Chinese Wedding

Money from China

I of course cannot prove it, but I am convinced that the failure rate for a business whose owner has gone to a Chinese wedding is at least five times higher than for those who have not.

Let me backtrack a bit and explain.

The Quality Inspection blog recently did a post, Corruption of inspectors: the role of social pressure, discussing the “risk of corruption of inspectors in factories” and two types of bribery. One is outright corruption where an envelope filled with cash changes hands. Inspectors know this is forbidden and engaging in it is risky. The other kind of corruption is where the factory treats the inspector so well he or she feels obligated to “repay these favors.”

According to the post, this subtle pressure is very common in China and can be very effective. It then delves into the psychology of why people around the world feel compelled to reciprocate and why this sort of social pressure is stronger in China than in most other places.

Now here’s where the weddings come in and what we have seen as international lawyers who devote massive amounts of time in working with factories all over Asia, and especially in China. Our clients often tell us that the potential evils/risks we see in their deals “could never happen because I am really good friends with so and so. . . . Such good friends, in fact, I attended his daughter’s wedding. I am not kidding when I say I do not know how many times our lawyers get told this, but I do know that whenever I am told this, I bristle. And I do know this happened earlier this week.

I responded by saying that “you having attended the wedding of your factory owner’s kid actually makes me more worried about something going wrong than if there were no friendship between you two. And if you two are such good friends, it should be relatively easy for the two of you to reach agreement and get that in writing. Also, it is even more important that you two reach clear agreement on your relationship now so as to avoid problems later that might impact your friendship. My client thought about it and, to my surprise, agreed with me.

This is not a peculiarly China phenomenon and I am not saying you should never “mix business with pleasure.” But you should not allow friendships and weddings and social gifts to impede your business judgment and you should not for a moment believe that going to a wedding means your business relationship will always be safe and secure.

Would love to hear your stories either reinforcing or refuting the above.

8 responses to “Social Pressure Corruption in China or Downfall by Chinese Wedding”

  1. Not the same, but somewhat similar: The longer I work for this Chinese company, the more I hear things like “we’re friends, we’re a team, we’re the same” as an excuse to not pay me my salary and benefits (on time, the full amount, or at all). At the same time, ‘friends’ outside the company are awarded (government subsidized) contracts and get paid in-advance, with work/delivery seen as optional. Very strange, or maybe not strange at all? Of course, I don’t drink, don’t smoke, don’t sing, and don’t sleep around, and I judge products/contracts on their merits, so I’m just asking for it, aren’t I?

  2. This may be due to a cultural misunderstanding.
    One thing here is that being invited to someone’s daughters wedding in Chinese circles isn’t nearly as big a deal as getting invited to someone’s daughter’s wedding in the US. *Everyone* gets invited to someone’s daughter’s wedding. There is an economic reason for this in that what tends to happen is that weddings are extremely lavish and expensive affairs, so the more people that you invite to the wedding, the more people you split the cost of the wedding over.
    Also there is a way that Chinese organizations have used to get out of a personal social obligation which is to have someone that doesn’t have social connections involved in the decision making. The social connection is personal. which mean that if you are off the hook if the decision making process involve someone that doesn’t have a personal connections.
    The Chinese government uses this since invariably the Governor of a province or county administrator is someone that rises through the bureaucracy and has local connections, whereas the Party Secretary is invariably an outsider that doesn’t have any personal local connections. The Chinese military and financial regulatory systems are set up to constantly move people around so that they *don’t* have local connections.

  3. Having good friends is important, but you can seriously, seriously overestimate the depth of a friendship. One cultural difference between Americans and Chinese is that Americans tend to call everyone a “friend” and being a “friend” is something pretty causal which involves very few social costs.
    One test that you can use to see if it really is a friendship is to ask if you’d be seeing each other if money weren’t involved. This applies to Chinese weddings. One thing that I have noticed with Chinese weddings is that people that are really in the inner circle of social relationships, don’t give large gifts or in some situations any gifts at all. The other thing that I’ve noticed is that Chinese people tend to be a lot less formal and polite with people that they have very deep social relationships with.
    Also, you know that you have a deep relationship with someone not if you get invited to a wedding, but if you get invited to a funeral.

  4. Chinese wedding is a complicated affairs in China.
    When it comes to business, or with official, it is even more complicated. If you are invited to the wedding could mean numerous things: a close friend or a potential opportunity for “gift”.
    Whether it will secure or hurt your business relationship also depend the personality involved. Gift may work on one person and may not on others.
    There is no fast and hard rules. And there is no easy answer as you seem to indicate here.

  5. Interesting point, as mentioned by one of the commenters, Chinese will typically invite anybody and everybody that they know to a wedding in hopes of economic gain. To be honest, though, I actually thought you were going somewhere else with this, as there was a NY Times article a month or so back on the situation in Korea and how weddings are often a way for corrupt gift giving to fly under the radar (plus blurring the line of FCPA violation for Americans).

  6. Getting invited to a funeral may not necessarily be a good test of friendship. I’ve known people who have managed to turn a relative’s funeral into a profitable venture from the receipt of Chinese white envelopes given by attendees.

  7. My brother and I run a small factory in Taizhou, Zhejiang province, we would look at the issue differently, Renaud.
    We, as supplier, don’t like to pay purchasers/quality inspector commission, we don’t like to bribe them unless we have to. In the business practise, the purchaser and quality inspector will ask for benefit(commission, money, gift, meal, or sex bribe), we are confident in the competitiveness of our products, the quality, the price. But in many cases, if we refuse their request, we will lose the order, we will fail the test, we will lose the business.
    We are not alone, as I have worked in 5 to 6 companies, from manufacturer to trade company, the situation are all the same.
    I would look at the issue from society development point of view. I mean the legal system, the penalty system or to put it precisely, the law enforcement in China are not mature or developed enough to tackle the commercial corruption issue, commercial corruption is no difference to corruption in the political area.
    However, Dan, I do agree with your point, that we should not mix business with social relationship.
    In China, we have an old saying “亲兄弟,明算帐”, to put it in English “Even brothers keep careful accounts. ”
    BLOGGER NOTE: I removed this commenter’s website address because I did not think it wise to include it when this person pretty much admits to having engaged in bribery.

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