Monday, August 12, 2019

Anticipate hold-up--China edition

From a friend who worked in China for two years:
I was working with an education consulting company, and had signed a contract prior to moving that said I would live and work in Chengdu for two years. After about 4-5 months in Chengdu, my company said they needed to relocate me to Shenzhen. I agreed under the condition that my move would financially covered.  
I arrived in Shenzhen the night before starting work. That next morning I received a message from my manager saying that I needed to sign a contract promising that if I left before my two years were up, I would have to pay back everything from my move! 
Obviously, I refused, and then had to speak with my boss back in Beijing. She expressed her "disappointment" in me, raised her voice, and said someone else had already signed and I should too. She came up with a few other solutions (one was that I would sign a contract promising not to tell my colleague that HAD signed, and if I did tell him then I would have to pay them the convenient amount of my move- haha), but ultimately realized I would not budge and dropped it.  
Needless to say, it was a strange experience! China can be a weird place. 

In this case, my friend was "held up" after she incurred the sunk moving costs.  She never received the reimbursement.  

The difficulties of anticipating hold-up and then contracting around it, make it more difficult for the Chinese economy to adapt to change, and to create wealth by moving assets to higher-valued uses. 

1 comment:

  1. I think she should have signed if signing => reimbursement subject to possible claw back. Not signing => no reimbursement. Signing => reimbursement with possibility of keeping it. She had already signed a contract agreeing to live in China two years; I don't see how the new contract added to her cost.