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Negotiation in the West is incorporated into college curriculum because theories have been established with real cases. China has its own negotiation style and principles; no explicit theory has been defined but common observations. The concept of trust is nevertheless existing in both Western and Chinese contexts with difference meaning. The 21st China-EU Summit and the 9th Business Forum between China and Eastern Europe have taken place early this month. Encouragement of business and trade will lead to more negotiations between Chinese and European companies and businessmen. It might be helpful to talk about the concept of trust in China in comparison to it in Europe.

Trust in Europe is established by rules and laws in a broad perspective. Companies are trustworthy because of their observance to the laws and local rules. The supplements to this trust are the quality of the goods or services and the implementation of customer satisfaction nowadays. All these will add up to the good reputation of a company which makes a company trustworthy. It is hence very crucial for Chinese companies to consider this interpretation of trust in approaching European counterparts. For Chinese companies having branches or subsidiaries in Europe, it is another delicate question of balancing the different interpretations of trust.

China in general takes a different perspective on trust, which is strongly influenced by its culture of ethics and morality focusing on people and relationships. Trust is formed when the ethical and moral aspects are fulfilled. For instance, buying products from acquaintances who are doing related businesses is a signal of trust, because this shows that the buyer cares about the seller’s business by buying product from seller exclusively when in such need. In return, the products that the seller delivers to the buyer is of guaranteed quality and safety. This could subject to abuse of such trust for personal gain, but good maintenance of such trust by both sides will receive high level of respect.

Another example is the euphemism in language when negotiating in business. Chinese culture considers the values of long-term cooperation and friendly relationships more important than counting every penny or pushing one term for the current case. Hence a compromise is most likely to be reached if Chinese companies intend to look for further collaborations with the same company that they are negotiating now. These underlying values could also be reversely used as a signal for successes or failures if the negotiation attitude from the Chinese companies tends to be open and disputable or firm and pushy.

Around the negotiation, the proactiveness in responding to messages and propositions of Chinese companies also could tell the general approach of a project or a cooperation possibility with foreign companies. Less or late responses entail a greater possibility that this project could be postponed or even cancelled. Another remark is that not every Chinese or European is the same, specific decisive factors should be discovered by the parties involved beforehand for a better start of talking.

Doing business in the Netherlands in comparison with Germany

Attitudes and values are the foundation of each country’s culture and the building blocks of corporate culture development. Cultural influences, attitudes and behaviors vary within and between nations and are strongly embedded in communities. Because the Netherlands and Germany share a border together, there might be some misconceptions regarding the business culture in both countries. Some are the same, some vary. These business aspects have been chosen to inform the Japanese as thorough as possible in order for no party to get confused or hurt.

https://www.djw.de/de/infopool/cultural-business-differences-between-germany-and-the-netherlands-an-overview-for-the-japanese-businessperson-who-might-be-working-with-both-countries

The updated International Financial Reporting Standard 16 on leases was effective as of 1^st January 2019. China also took this update quickly into the Chinese GAAP, because China has been keeping its local GAAP in convergence with the international standards for a better environment facilitating more foreign investments.

The Chinese GAAP is named as the Chinese Accounting Standards (CAS). It is applicable to enterprises for recording and reporting their financial accounts. The CAS is very similar to IFRS. Less use of fair value method in financial reporting is one of the few notable differences that remain. Foreign invested companies or subsidiaries in China need to follow the Chinese GAAP for statutory declarations and inspections in China. Meanwhile, the considerable similarity makes such firms easier to go international with these financial reports.

The new IFRS 16 affects the lessees far more than the lessors. The categorization of financial leases and operational leases was phased out. Since 1^st Jan. 2019, the right to use must be recognized in assets and the lease debts in liabilities for every lease. The purpose of such a modification is to improve the visibility of lease commitments and the reflection of economic reality of each company. China actively followed this update in IFRS by incorporating the new method on recognizing leases in the CSA 21, dated back in 2016 when the new IFRS 16 was released. Main contents were kept the same as in IFRS, while additional disclosures on operational leases were added.

Lessees shall disclose the carrying amounts and depreciation charges at the beginning and ending of each period, gain or loss in the current period, total cash flow relating to leases, gain or loss relating to leaseback, information relating to lease liabilities, right to use assets relating to investment on immovable properties, and simplification treatment on any short-term lease or low value assets lease if applicable. Additionally, disclosure shall also be made by lessees on scope or type of lease, potential forthcoming cash outflow, restrictions or commitments derived from lease, information on leaseback and other relevant information.

Lessors shall disclose the income derived from leases and variable lease payment income separately, fixed assets on leases and per self-occupied separately, expected annual lease payments in the forthcoming 5 years from the current year and the net lease payment after 5 years, and, if necessary to report, description of lease activities, reservation for risk management and other relevant information.

Applicability of the new CAS 21 was officially confirmed by the Chinese Ministry of Finance in December 2018. Companies listed in both Chinese and any foreign stock markets will start using this new standard on leases on 1^st January 2019 and onwards. Other Chinese companies will start to follow the new CAS 21 as of 1^st January 2021. Companies of which mother companies or subsidiaries are listed on any foreign stock markets may adopt CAS 21 in advance but not earlier than adopting CAS 22 and 14.

Chinese Premier Li Keqiang and 16 CEEC leaders attended the 9th Business Forum of CEEC & China held in Croatia on 12th April 2019, in which Premier Li made the call to deepen economic and trade cooperation between them. China wishes to align the One Belt One Road Initiative with the development strategies of every CEEC to pursue joint progression and mutual benefits, thus deepening the China-CEEC economic and trade cooperation with openness.

Facilitating cross-border logistics is one of keys to strengthen such a cooperation. China will provide a green channel for CEEC exports to China and facilitate the land and marine transportation between China and Europe. Besides, Li called for further markets opening-up and simplifying customs procedures.

Li pointed out that certain fields deserve more cooperation between China and CEEC, including agricultural products and machinery, electrical products such as motors and household appliances, and infrastructure construction. As the key contributors to economy, small and medium-sized enterprises (SMEs) will be given with more investments and convenience by the Global Partnership Center of CEECs and China launched by the leaders. Li also called for advanced financial conditions and a diversified funding pattern as well as development on third-party market cooperation, joint bidding and public-private partnership.

Notably in the past few years, exports from the CEEC to China have gone up by almost 5 times while the cooperation between CEEC and China gets increasingly promoted.

Chinese Premier of the State Council Li, Ke Qiang met with President of the European Council Donald Tusk and President of the European Commission Jean-Claude Junker in Brussels, Belgium on 9^th April 2019 for the 21^st China-EU Summit which has been ongoing annually since 1998. A Joint Summit Statement was reached upon the closing of this meeting at a higher level. In general, a partnership containing peace, prosperity and sustainability was the founding stone.

China has its wish of promoting and advancing cooperation and exchanges in technology and innovation. Seeking a strengthened market cooperation at mutual trust and benefits is the key. To the EU’s perspective, the purpose was advancing the strategic partnership that they have been having with China. The rebalance of such partnership was also considered based on the opportunities and challenges presented by China. EU knew that seclusion and conservation will not bring the community forward for too long if only risks on being negatively affected by other players in the world is mitigated. This is an era of learning to be more competitive from others at every moment. Being discrete about own and others’ competitive advantages and any shift as such is the key attitude.

China agreed to open markets in a deeper degree to agricultural products and foods coming from the Union with adherence to the ISO provisions. The discussion regarding cooperation on 5G internet operations was touched upon and a friendly consensus on advancement of communication and technical collaboration.

The good news for many European businesses is that China is expeditiously working on better transparency, more fairness, more mutual respect in transnational collaborations and trading，particularly those concerning technology or intellectual properties. This signifies politically reducing gaps between local businesses and foreign investors. Increasing facilitation and protection will be in place, or some of these were already in place — the lately modified Foreign Investment Law offers a warm welcome to foreign businesses.

The fertile ground between China and EU for many opportunities of trades, export and import, ICT, agriculture and cultural exchange is upgraded. For businesses, the important line is about trust. People always find more opportunities and result with more successes where mutual trust is built. Stay tuned to follow up with more update on China and Europe in our next blog.

Change in monetary policy

The Chinese economy is growing slower than expected. Analysts stated that the China Central Bank would soon loosen its monetary policy to stimulate the economy. If that happens, China will john other major economies in the world which arepursuing growth-friendly policies. The Central Banks of the European

Union, United States and Japan have realized that a tightened monetary policy could not protect the economy from the risks of the Brexit, trade tensions and financial vulnerabilities. The lowering of economy growth forecast by the International Monetary Fund at the beginning of the year further aggravated their sentiments.

Potential reasons slowing China’s economic growth

Although the international economy environment are extremely dynamic in recent years, China’s export is not severely impacted. Back in 2018, China’s export has increased by 9.9%, and the export to the United States has increased by 11.3%. In 2018, China’s export contribution rate towards economic growth is -8.5%, higher than that in 2017 by 0.5% (-9%). These factors indicate that the reason slowing China’s economy growth is more domestic demand than external influences.

The dilemma that China Central Bank is faced with

The relatively tight monetary policy has resulted in massive shut-downs of Chinese domestic SMEs. The SMEs suffer not only huge fiscal burden from the bank, but also the decreasing prices over the industrial products. A loosened monetary policy is life-saving for them.

On the other hand, the China Central Bank also realized that the decrease in product prices has not lowered China’s consumer price index (CPI), which instead has gone up by 2.5% in 2018. The China Central Bank fears that if monetary policy is loosened, the prices and investments in immovable properties especially real estates for residents will increase dramatically which is exactly the thing that China wants to avoid. Confronted with such a dilemma, the China Central Bank has been more careful and critical in loosening its monetary policies.