To be of value to the parties, contracts must be clear, not long. However, long and clear is better than short and ambiguous. Clarity is a function of how the contract is written not how much is written. An English-language contract written by a bilingual lawyer with a feel for the eventual translation is a great help to both the PRC and the foreign parties.

If the contract is ambiguous, who is to say that it has been breached? It is often said that, in China, every letter of the contract is adhered to and it will be expected that the foreign party will be faced with more obligations than it thought it had. It is a feature of complex projects that a few (hopefully minor) cracks will open and some items will not be included in the planning. The foreign party will be encouraged to supply the missing items or additional man-weeks of training or extra start-up assistance because China is poor and the Chinese partner has no approved funds. The resulting impasse they have arrived at may be a disagreement that can only be resolved in the courts or before an arbitration tribunal. Commercial litigation in the PRC is on a steep increase (some of the lawyers who were negotiating joint ventures a few years ago now spend a lot of time in dispute resolution) in the PRC and it is not always the foreign party that loses.

Ed Neunuebel is a USA attorney who has served as Head of China [Hong Kong] for a global law firm and Pacific Area General Counsel for America's largest chemical/plastics company.  Fluent in written and spoken Mandarin, he has been involved primarily in the chemical, crop protection, mining, oil & gas, shipping and steel industries during his 27 year career as an international lawyer and has concentrated on joint ventures, direct investment, corporate, commercial, M&A, and intellectual property matters. This article is taken from his contribution to "Introduction to Doing Business in China" published by Juris Publishing, Inc.