I’ve quoted from the book before: it was Lin Yutang who referred to China as “a nation of individualists” in this book, published in 1935. Lin addresses what he calls Chinese “indifference,” which, he argues, is a function of the world’s unpredictability, especially with regard to (lack of) legal institutions to protect citizens:

Chinese youths are as public-spirited as foreign youths, and Chinese hot-heads show as much desire to “meddle with public affairs” as those in any other country. But somewhere between their twenty-fifth and their thirtieth years, they all become wise, and acquire this indifference, which contributes a lot to their mellowness and culture. Some learn it by native intelligence, some by getting their fingers burned once or twice. All old people play safe because all old rogues have learned the benefits of indifference in a society where personal rights are not guaranteed and where getting one’s fingers burned once is bad enough. (pp. 48-9)

This connects directly to what Americans sometimes perceive as an indifference to the “letter of the law”:

In one word, we recognize the necessity of human effort but we also admit the futility of it. This general attitude of mind has a tendency to develop passive defense tactics. “Great things can be reduced into small things, and small things can be reduced into nothing.” On this general principle, all Chinese disputes are patched up, all Chinese schemes are readjusted, and all reform programs are discounted until there are peace and rice for everybody. (p. 56)

No wonder Americans, laser-focused as we are on “honoring our word,” sometimes get up in arms. Contracts are about “honoring our word”; hétong are about reducing differences and working together to create “peace and rice for everybody.”

A caricature, to be sure, but one to bear in mind — and really think through — as you continue to develop your relationships in China.

To a “typical” American a contract serves two purposes. First, it helps ensure that something gets done, regardless of who the parties are and what feelings they might have. Second, the contract ensures that my organization’s interests are protected: should any dispute arise threatening my organization’s well-being, the contract can stave off damage.

A key assumption, far off in the background, underlies this: the deep-seated belief in the ability of human beings to mold the world as we see fit. This is central to the founding myths of the United States: a new land waiting to be created, intentionally, by human beings. Bending the world to our will requires planning, and a key part of the planning process, designed to maximize the probability of success, is the contract.

Given these beliefs, the contract is a way of saying:

“We all know what there is to be done. It’s up to us to do it. And we need a plan to get there. Here is a breakdown of who’s responsible for what in order to get the job done. We know we may want to change things, but we know we can’t, because this is what has to be done, and since we’re all strangers here we’re not really sure we can trust the other guys, and we need a guarantee that they’ll uphold their end of the bargain and not put our organization at risk.”

The Chinese cultural mindset operates from different basic assumptions. If the key unit in the American mindset is the “project,” or “getting something done,” in the Chinese mindset the key unit is the relationship. And if the world is at the whim of humans in the American mindset, in the Chinese mindset humans are at the whim of the world. These two aspects are related: what gets people through hard times is relationships. Things might be going well today, but tomorrow could hold disaster. It’s best, then, to maintain equanimity and keep relationships solid.

These beliefs create a fundamentally different frame of reference for hétong than for contracts. In an inherently harsh and unpredictable world, we must be ready to change our approach on the fly, and to maintain alliances, possibly at the expense of short-term “self-interest,” for the sake of mutual support, even survival, through difficult times. We might “translate” the above statement as:

“We all know what there is to be done. Here is a breakdown of who’s responsible for what. We also know that this is an agreement among people, and as we get things done together we want to be sure we don’t ruin any relationships, because we may need each other later. We also know that circumstances are always changing, and we must adapt. So if we run into trouble we may have to reconsider what we write down here. These are guidelines; what’s more important is that we work together when there are problems, adapting appropriately to changing circumstances, and making sure that relationships stay intact.”

One crucial thing to see about this is that it has nothing to do with what we call “honesty.” Nothing whatsoever. Both views of the contract/hétong are perfectly “honest” in their own ways. But because of all the cultural baggage Americans bring along with our views of contracts, it’s very easy to go from “my Chinese counterpart wants to rework the contract” to “the Chinese are dishonest.”

Will your organization have to deal with cultural differences when it comes to contracts/hétong and their enforcement? Most likely. But it doesn’t have to go down the familiar and unproductive road of finger-pointing and crying foul. Know what you’re dealing with. Expect it and understand it. If you do you’ve got a leg way up on your competition. While they’re busy complaining, you’re working things out and moving forward, solidifying your partnerships, and laying a foundation for a productive and successful future.