China ready

Know how – partner – contract

Becoming interested in the possibility of starting a school with an overseas partner  is one thing. Being ready for a project is quite another. Mark Schaub looks at what this might mean in China.

Am I ready to engage with China?

A China project is likely to be more time-intensive and more involved than initially forecast. There are difficulties in assembling a successful project team. Teachers or administrators may be wildly enthusiastic at the prospect of going to China the first three or four times if they are visiting Shanghai or Beijing. If the project is in a third-tier city then their enthusiasm may wane more quickly. The most successful project teams are indeed teams rather than individuals.

Xiangyang

Does the project make any economic sense?

It is crucial for the foreign school to determine the intentions and objectives of the China project. Very often, the foreign school will meet or be introduced to a Chinese “partner” and the two will decide to “do something”. The Chinese partner might have even less clear intentions or objectives than the foreign partner. Having two partners without a clear strategy (in many cases they do not even independently have a strategy, much less a joint strategy) is unlikely to lead to a smooth and successful implementation of a project.

Implementation of projects requires clearly determining the objectives; economic feasibility; legal compliance; roles of each party and resources required.

 

Get China Know-how

It is important for educational entities to reach out to the many helpful organizations that seek to foster cooperation with China such as CBBC (China British Business Council); DIT; British Council and BritCham. Indeed, BritCham is the longest running Chamber of Commerce in Shanghai (and recently celebrated its centenary).  Accordingly, the UK has excellent infrastructure in place both in the UK and China but the question is whether British educational entities are adequately tapped into these resources and using them effectively?

Pick the Right Chinese Partner

Most educational entities engaging in China will have a local partner – be it a JV partner, school, fund or investor. The single best risk minimization step a party can take, is to find the right partner. Having the right partner will increase the chance of success and if you have a good understanding of one another then the risk of a dispute or gridlock equally recedes.

Dealing with established Chinese education entities can be bureaucratic and opaque. On the other hand there are increasing Chinese entrepreneurs willing to invest time and money in education and interested in cooperation. Unfortunately, few of these entrepreneurs have experience in education … or management … or appropriate business practices.

Many international schools place more emphasis on the Chinese entrepreneur having lived overseas and being able to speak English rather than having any experience in China or education … or money… or contacts … or anything other than speaking English.

They have their own ideas about how the business should be run, and unless the international school stays in close contact, then the management and operations of the school may take (pick one or more adjectives) an unusual/frightening/peculiar /brand-damaging turn.

For this reason it is strongly recommended to find a partner with an education pedigree (better to let a competitor cut their teeth with a novice) and to conduct some due diligence on any prospective partner before embarking on a new adventure.

 

 

Good Contract

Given differences in law and culture it is important to spell things out in China. The Chinese often feel the need to very clearly set down the rules.

For this reason it is a good practice to prepare relatively detailed contracts to stipulate matters specifically rather than rely upon assumptions. The more detailed the contract, the more it protects both parties from suffering a major misunderstanding.

When preparing a contract for China, it is recommended to draft the contract in both English and Chinese. We often have experiences with clients who believe that the deal is “done” and it is just the “paperwork” that needs to be completed. Generally, these clients are surprised that once the formal contract is presented to the Chinese party, the discussions recommence, often as if there had never been previous discussions.

Experience shows that it is important to:

(1)  Document discussions with Chinese partners; and

(2) Not to assume that discussions held purely in English are understood or considered as being formal discussions by the Chinese side.

The best practice is to hold negotiations based on a formal written contract. The result will be more efficient and certain.

 

Mark Schaub

China veteran and lawyer Mark Schaub is an international partner and global co-head of Consumer Practice at King & Wood Mallesons. He has advised on foreign investment projects in all major sectors in China with a cumulative value exceeding USD 20 billion. He is familiar with China issues faced by companies and education institutions of all sizes. He speaks English, German, and Mandarin. King and Wood Mallesons offer a variety of legal services to UK schools in the process of finding and working with an educational partner in China.

 

International Partner, King & Wood Mallesons

London/Shanghai

T +44 2075501564

mark.schaub@eu.kwm.com

 

 

Feature Image: by Ulrike Leone from Pixabay
Support Images: by 帆 张Gerd Altmann from Pixabay

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