Early spring had arrived in the south of China and it was blossoming throughout Shenzhen. On the morning of January 23, 1992, Zhou Haonan rose early and hastily headed for Shekou. At half past seven he arrived at the Shanghai Restaurant with an official bag and a sample.

Mohammed, a client of his from Holland, came to the dining table. Mohammed had ordered salad and coffee, Zhou a cup of Jupu tea and a big corn bread. They looked through the window at Taizi Road outside. While they were dining they discussed foreign business.

Mohammed was a merchant of the Middle East extraction, with blue eyes and a big nose, wearing a white headdress and gown. He had immigrated to Holland at an early age, together with his father, and set up a wholesale tools shop in Amsterdam, specializing in cheap but high-quality hand tools imported from China. This was their second meeting. Before this they had communicated several times by fax.

Now Mohammed had a chance to visit Shenzhen on his way to Hong Kong. Mohammed wanted to purchase a quantity of claw hammers from the Xinyi Kapok Tools Factory in the west of Guangdong Province via Zhou’s company. This was a trial order as bulk cargo instead of as a container load. At that time very few factories had import and export rights, so their products had to be exported by the State-owned foreign trade company.

After Mohammed and Zhou had discussed the claw hammer sample, Mohammed was satisfied with the quality and they agreed at a price after concessions. Mohammed would take the sample. Now it was time to negotiate the payment terms, which was the most important of all terms in this contract.

“I hope you can open a letter of credit to the Bank of China in favor of our company,” said Zhou. His speech was as pure as aged wine. He knew the Bank of China had the advantage in international trade over the other Chinese banks.

“China Bank?” asked Mohammed. He spoke in a strong nasal tone, which sounded as if he had just recovered from a cold.

“Yes!” said Zhou. He also liked to leave out the “of” from “Bank of China,” like abbreviating “Hong Kong and Shanghai Banking Corporation” to “Hong Kong Bank” and “Peking University” instead of “University of Peking.”

He went on, “Our company has opened an account at the Futian sub-branch of China Bank, which has many convenient branches.” He pointed to a board opposite the restaurant which announced that the building was the Shekou sub-branch of China Bank. The four characters written by Guo Moruo were still beautiful and powerful.

“Apart from a letter of credit, is there any other payment system we could use?” asked Mohammed.

“For both importer and exporter, a letter of credit is the most fair and suitable way,” replied Zhou.

“I see, but the total amount is only US$3,516. I don’t want the bank to earn the charge from opening a letter of credit,” said Mohammed. “I hope you can accept documents against payment terms. That means I’ll pay right away once the goods arrive in Holland.”

“If you don’t pay, nobody will pick up the goods in your port and they will be transported back to China and double transportation expenses will be charged,” Zhou explained. In the meeting it wasn’t appropriate for him to say directly that this condition was in case Mohammed refused to pay and disappeared after receiving the goods.

“This is only the first order; there will be a second soon,” Mohammed said, hoping to persuade Zhou.

“But it must be mutually satisfied before the second order,” Zhou replied.

The discussion descended into chaos. Foreign trade includes a series of points such as checking a sample, making a sample, sending a sample, design, production, packing, inspecting goods, transportation, commodity inspection, customs clearance, payment, foreign exchange settlement, foreign exchange verification, tax rebate and so on.

If any of these stages goes wrong the deal fails.