China, International Law

Doing Business In China: Don't Trust, But Verify

When the rewards are high and the consequences of getting caught are low, people will cheat.

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China recently confronted yet another massive cheating scandal, and again this year, large numbers of Chinese students were caught cheating on their applications to U.S. colleges. A New York Times article neatly sums up the issue:

Colleges, eager to bolster their diversity and expand their international appeal, have rushed to recruit in China, where fierce competition for seats at Chinese universities and an aggressive admissions-agent industry feed a frenzy to land spots on American campuses. College officials and consultants say they are seeing widespread fabrication on applications, whether that means a personal essay written by an agent or an English proficiency score that doesn’t jibe with a student’s speaking ability. American colleges, new to the Chinese market, struggle to distinguish between good applicants and those who are too good to be true.

Americans who never deal with China are shocked by the extent of the cheating: more than 90 percent of applications contain some kind of fabrication, according to education consultancy Zinch China. Americans who regularly do business with China would probably say that the other 10 percent merely didn’t get caught…

If you’re doing business in China, you should assume that 90 percent of what your Chinese counter-party tells you is false. This is not to say that 90 percent of people in China are liars, or even that 90 percent of what your Chinese counter-party tells you is actually false, but rather that you should proceed as if that is the case. It’s a simple matter of incentives. There is an extremely high probability that your Chinese partner will try to cheat you, because the chance they will get caught before you pay them is small, and even when you do find out, the chance you can do anything about it (legally or otherwise) is also small.

This is why doing business in China requires a contract written in Chinese and enforceable in a Chinese court. How many American companies would cheat, if there were a really high chance they could get away with it? A lot more than most of us might like to admit. Americans commonly use the Wild West as a metaphor for modern China; we would do well to remember how many hucksters, swindlers, charlatans, and mountebanks roamed the American West.

Jiang Xueqin, the director of the international division of Peking University High School wrote about how U.S. colleges should interview Chinese high school students so as to accurately gauge their abilities:

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[The interview] ought to be focused, detailed, and deliberate. Here are some examples of good interview questions that look for empathy, imagination, and resilience:

Pick a novel or a movie, and discuss the characters. Which character did you identify with? Why? Which part of the book or movie made you sad? Made you angry? Why? What experiences have you had that remind you of events in the book or movie?

Pick a memorable experience, and explain why it was so memorable. Tell the story. Explain your feelings during the experience. Why did you have these feelings? Do you know anyone either real or fictional who has had a similar experience? Did they behave the same as you did? Do you think their feelings were the same as yours?

When was the last time you were angry or sad?

What made you angry or sad? How did you get over your anger or sadness? What do you think will happen the next time you encounter the same situation?

Persist in asking “why?” Look for sincerity, for logic, and for clarity of thought.

What Jiang describes is due diligence tailored to the specific situation, just as it should be. And it is precisely what many American universities (and businesses) fail to do. American universities are desperate for students who will pay full tuition, and they often use Chinese placement agencies to deliver them such students. If a student gets admitted to an American school, the placement agencies get paid $6,000 or more and the American universities pocket the hefty tuition. The American universities claim to be shocked to discover that Chinese agencies are falsifying student applications on a massive scale.

Employers ought to be similarly skeptical when hiring employees from China. Don’t take résumés or transcripts for granted; check references and confirm employment histories. This means contacting schools and employers in China. Most of all, it means conducting a meaningful interview.

Let’s be clear: the truth about cheating in China is considerably more complex than anything captured by a single statistic. Some claim these stories prove that “lying” doesn’t mean the same thing in China as it does in America. My view is that these stories have less to do with China and more to do with human nature. When the rewards are high and the consequences of getting caught are low, people will cheat. Heck, people cheat even when the risks are high.

The admissions departments of American universities are learning a lesson that businesses dealing with China have already learned the hard way — or will soon enough. You need to devise and employ systems to verify just about everything.

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Dan Harris is a founding member of Harris Moure, an international law firm with lawyers in Seattle, Chicago, Beijing, and Qingdao. He is also a co-editor of the China Law Blog. You can reach him by email at firm@harrismoure.com.

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