The meeting had finished, we were walking out of the building, and the owner of the European company turned to me and said he had been coming to China for years and had never once left that room with anything like what we had just got.
What we had just got was a letter of credit.
It sounds like a technicality. It was not. For years, every order this company placed with that supplier had been paid cash in advance. The money left his account before anything was manufactured, and stayed gone through production, inspection, loading and six weeks at sea. On repeat volume, that is not a payment term. That is a permanent hole in the balance sheet, refilled and re-dug on every shipment. Moving to a letter of credit hands the risk to a bank and gives him his cash cycle back. It was probably the single largest financial improvement available to that business, and it had been sitting there, unclaimed, for the better part of a decade.
He had not been ignoring it. He had raised it. More precisely, he had mentioned it, several times, across several trips, and each time it had dissolved somewhere between the two sides of the table without anyone quite refusing him.
Trust in China Does Not Accumulate By Itself
The assumption underneath all those trips was a European one, and it is so ordinary that most executives never notice they are carrying it. At home, a track record is an accruing asset. Pay on time for eight years and something happens without you doing anything: a credit controller flags the account, a system moves you into a different tier, someone offers you terms you never asked for. Your history works on your behalf while you sleep.
Nobody is going to do that for you in China. The default position holds until it is argued away, and it will not be argued away by the passage of time or by the size of your orders. I have watched companies interpret this as coldness, or as evidence that the relationship is not what they thought it was. It is neither. It is simply that the terms you have are the terms someone once agreed to, and until a person in a room gives a reason to change them, there is no mechanism by which they change.
Which brings us to the argument he had been making. “We have been buying from you for years, we always pay, we deserve better terms” is a statement about him. It describes his loyalty, his reliability, his sense of what is fair. It says nothing whatsoever about the supplier’s exposure, and the supplier’s exposure is the only thing being decided. He was answering a question nobody had asked.
The Person Translating Was Not On Anyone’s Side
On every previous trip, he had travelled with an interpreter. A competent one, by all accounts. The interpreter did the job properly, which is to say that sentences went in one language and came out in another with the meaning broadly intact.
That is not the job that needed doing.
The job that needed doing was knowing that the request did not belong in the formal session at all. That the person doing most of the talking was not the person who could say yes, and that the one who could had not spoken in forty minutes. That “we will study it internally” was not a step forward but a polite close, and that treating it as progress meant losing another quarter. That the silence after a number is the negotiation, not a gap in it, and the instinct to fill it costs you the thing you came for.
None of that is language. All of it is judgment, and it comes from having sat on both sides of enough of these rooms to recognise the shapes.
Here is the part that should worry any executive doing volume in Asia. The interpreter is the only person in the room who understands every word that is said. It is the highest information position at the table, by a distance. Most Western companies fill it with someone hired by the day, who has no stake in the outcome, no mandate to shape anything, and occasionally, was found and arranged by the other side. You would never let the counterparty pick your lawyer. People do the equivalent every week and call it logistics.
What Actually Moved It
The conversation that produced the letter of credit was not clever, and it was not aggressive. It moved because the ask stopped being about him and started being about them.
Their real objection was never his creditworthiness. He was a good customer and everyone knew it. The objection was that they had never carried this kind of risk, nobody had ever given them a reason to start, and cash in advance is a position that costs nothing to keep. So you make their side of it small, concrete and boring. A letter of credit is bank backed, which turns a customer risk into a document risk. Their bank is comfortable with the instrument. And the upside, which is the part that actually did the work, is a customer whose cash is no longer frozen in transit for eight weeks at a time, which means larger orders, placed more regularly, easier to plan production around. That is a supply planning argument. It is not a favour, and it does not require anybody to feel generous.
Timing did the rest. The request did not go on the agenda. It went into the part of the day where things are actually decided, which is rarely the part with the projector on.
This is the piece Western executives find hardest to hold in their heads at once. The Chinese counterpart is ruthlessly pragmatic, and that is good news. It means the answer is available to you the moment the arithmetic falls on their side. What the relationship buys you is not sentiment. It buys you the chance to put the arithmetic in front of them and be believed when you do.
Pragmatism and Relationship Are the Same Thing
There are two ways to get this wrong, and they are opposites, which is why so many companies manage to hit both in the same year.
The first is pure transaction. Fly in, sign, fly out, trust the contract. The contract will not help you on the Tuesday your shipment is three weeks late and there are two other buyers competing for the same line time. Somebody in that factory is deciding whose order runs first, and that decision is not in any document you hold.
The second is the banquet theory: enough dinners, enough toasts, enough warmth, and commercial reality will soften. It will not. The dinners matter, but not for the reason people think. They are not the relationship. They are where you find out who actually decides, what that person is measured on, and where their own pressure is coming from. They are reconnaissance, and treating them as friendship is how you end up with a lot of goodwill and the same payment terms you had in 2019.
The relationship is what decides which way the pragmatism falls when something goes wrong. And something always goes wrong.
What I Would Do Differently, If I Were Him
Hire for the room, not for the language. Those are two different roles and there is no rule saying one person must fill both. Bring an interpreter for accuracy if you want one. Separately, bring someone whose judgment you are actually paying for, who has traded in that market, and who has an interest in what you walk out with.
Before any trip, work out what your ask costs the other side in their own numbers, and be able to say it in one sentence. If you cannot, you are not ready to ask, and you will spend the meeting explaining why you deserve something.
And stop waiting. Your terms will not improve on their own, no matter how long the relationship runs or how clean your payment history is. That letter of credit had been available for years. Nobody had ever asked for it properly.
I write from twenty years of building businesses between Europe and Asia. If your company is facing this, start a conversation.