building relationships
the china connection
From its San Francisco base and a Shanghai satellite, Heller Manus Architects does more than half of its work in China. But, says principal Jeffrey Heller, FAIA, business dealings are a lot more complicated than in the U.S. Donna Li, a senior partner at the AllBright Law Office, Shanghai, which helps Heller Manus navigate the bureaucracy, offers this advice for firms with their eye on China.
What major challenges do American architects face when doing business in China?
Business dealings in China face far more supervision and government control than in the U.S. American firms who want to set up a China office must apply to the Chinese authorities for approvals, or face severe fines for doing unpermitted business. Tax and foreign currency controls are the other major issues, and have a direct impact on profitability—even for architects without offices there. Only after the relevant tax is paid can money be exchanged from renminbi to U.S. dollars and wired out of China.
What kinds of contracts should be in place?
Usually a retainer agreement between an American architect and the Chinese client will suffice. Due to the differences in language and legal systems, AIA contracts need to be localized and translated before use. American architects may also need to adopt their clients’ contract documents, which are required in certain regions.
What legal recourse does an American architect have if something goes wrong?
You can bring a case of contractual breach to a competent People’s Republic of China court. If the retainer agreement contains an arbitration clause, the architect can submit the case to an arbitral tribunal either inside or outside China. Compared to courts, arbitral tribunals are generally regarded as more convenient and efficient. A number of arbitral tribunals in China, such as the China International Economic and Trade Arbitration Commission, have adopted English as a working language.
Any cultural differences related to business we should know about?
There are few, actually. In our experience, Chinese clients usually respect architects’ ideas more than American clients do, which gives architects more freedom to experiment.—c.w.
Foreign work is a leap of trust. Distance is disturbing when a client goes quiet, and there may be little legal recourse if a project evaporates midstream. Those scenarios crossed Seattle architect Stuart Silk’s mind when the agent for a large Chinese corporation asked him to design nine of the 80 luxury homes at Zhongkai Sheshan Villas, outside Shanghai. The agent had seen Silk’s work while touring a gated community in Palm Springs, Calif.
“There’s no linear way to check out these companies, but you can get a sense of their viability by looking at work they’ve done,” says Silk, AIA, founding principal of Silk Architects. “My rule was to do no work without getting paid in advance. We spent more time on the payment schedules than on anything else. In the U.S. we bill monthly, but in China it’s task-based. You send PDF’s but not AutoCAD files until the money is in the bank.”
Careful networking can prevent horror stories of architects left holding the bag. The Atlanta firm Mack Scogin Merrill Elam Architects, which designed four of the Zhongkai Sheshan Villas, was invited in by a reputable colleague. Other recognizable names on the team also reassured the architects that the project was legitimate.
Another major factor was in their favor, too: Foreign architects in China assume little or no liability because construction drawings are done by a local design institute. Yet inevitably that means relinquishing some design control, an issue that principals Merrill Elam, AIA, and Mack Scogin, AIA, resolved up front. “We had decided that our designs would be strong enough to sustain that loose fit,” Elam says. “We built in a certain amount of flexibility about how all the details might be executed. And they were good about asking for clarification when they didn’t understand the intent.”
Elam has found that the biggest difference working in Asia is how buildings are constructed. A labor-rich market means clients aren’t looking for off-the-shelf products. They want architectural sizzle, and have the manpower to make innovative concrete forms that would be prohibitively expensive here. That’s also true in India, she says, where the firm has designed multifamily housing—now on hold—outside Hyderabad for the emerging middle class.
“There’s a lot of residential activity at the moment in India,” agrees Suman Sorg, FAIA, principal of Sorg Architects in Washington, D.C. “We hope it’s not a bubble.” Her mid-size practice has pursued U.S. State Department work abroad since startup. But the gush of private-sector work in India is new and has filled a void since 2008, when those commissions dried up locally. A New York–based developer is keeping the firm busy with projects such as the Grand Arch outside New Delhi, which includes 900 units of middle-class multifamily housing in high-rise and mid-rise buildings.
As in China, India is creating towns from whole cloth. Sorg is thrilled to avoid the Nimbyism common in Washington, where neighbors balk at the idea of modern insertions and try to influence design, not always positively. The work there, too, is less budget-driven than in the United States. Although Grand Arch’s first phase was in planning during the global market meltdown, the developer held the line, intent on spending what was necessary to create a buzz. “The client didn’t make the units smaller or cheapen the price,” Sorg says. “It arrived on the market in 2009, and there was a lot of worry it might be too high a price point. But it got a lot of publicity, and everything sold in 48 hours.”
Sorg Architects is confident enough that this past September it opened a New Delhi office. Not only will the 10 or so employees be available to manage projects through build-out, but Sorg sees this as a long-term investment. “At the moment it’s not for the sake of profit, but to have managers from America train Indian staff,” she explains. “We are getting graduates from an MIT sister university, training them to support us in projects all over the world.”
Networking—the basis of any ongoing marketing effort—is a more expensive proposition overseas. The managers travel back and forth every five weeks, and Sorg, a native of India, has an advantage over her American competitors. “Clients like the fact that I have their sensibilities,” she says. “I understand privacy issues in apartments, where you have in-laws living with you—all the things I experienced growing up.”