China's CCM capability gap: a strategic inflection point for global commerce

In this episode, we explore whether China’s transition from manufacturing to services is truly constrained by a lack of Contract and Commercial Management (CCM) capability – or whether the reality is more nuanced.

We examine how different operating models – from scale-based manufacturing to more flexible, scope-based delivery – create very different commercial demands, and why China’s rapid capability development may be less about absence and more about compression. Ultimately, we’ll explore whether this moment represents a true capability gap – or a transitional phase that is already reshaping global competition.

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Transcript

SPEAKER_00 0:03

Well, hello again and welcome to the Leading Edge, a series which offers in-depth insights into the key challenges, innovations, and evolving dynamics of the contract and commerce landscape. I'm your host, Nikki Mackay, Chief Development Officer of the Commerce and Contract Management Institute. In today's episode, we're looking at China's CCM capability gap as a strategic inflection point for global commerce. China's economic rise is often framed as a story of manufacturing dominance built on scale, efficiency, and engineering excellence. And within that model, contracts were relatively simple: clearly defined scope, agreed price, delivery, and completion. But that picture has always been much more complex. China's economy spans infrastructure, construction, technology, and global trade, each with very different commercial demands. Now, as China's enterprises expand overseas and shift towards service-based models, the demands are changing once again. Services require something different, not just controls that define transactions, but commercial frameworks that manage relationships over time that can handle uncertainty and adapt as conditions evolve. The question then isn't simply whether China lacks CCM capability, it's whether its existing models, developed at extraordinary speed and often distributed across functions, can evolve quickly enough to meet the demands of complex global service-led commerce. So today I'm joined by our very own executive director, Tim Cummins, and Deborah Ann Strider, senior expert in contract and commercial management at Huawei Technologies, who will help us explore that tension between capability and maturity, between speed and depth, and between the perceived gap and a rapidly closing one that could redefine competitive advantage. Tim and Deborah, welcome to this podcast today. Thank you for joining me.

SPEAKER_01 2:37

Thank you. Thank you. And thanks for a great introduction.

SPEAKER_02 2:42

Thank you for a wonderful introduction. I have to agree.

SPEAKER_00 2:46

Thank you. So, Tim, why don't you set the scene for us? Go ahead.

SPEAKER_01 2:50

Yeah, let me very briefly set my perspective on this. So uh clearly, as you highlighted in the introduction there, uh China's um incredible reputation for the manufacture of goods, for the development of new technologies. Um and we've obviously seen some tremendous success stories in terms of their operations in the international market. But actually, the proportion of companies that are really operating that way is relatively small. And the data certainly points to the fact that a high proportion of the past educational system of China has really focused on the production of engineering graduates, which has been phenomenal in building its success in many of those technologies and product developments, whether that's cars now, driverless cars, or whether it's uh in the telecommunications industry, or in uh obviously the energy sector, etc. It's also had a high concentration on the development of lawyers. And I know a lot about that because we have been quite involved with a number of the leading uh Chinese law schools around training. But what I also know from all of that experience is that there is that gap in the middle, that lawyers are not taught commercial, engineers are not taught commercial. In fact, there is no evidence of commercial really being the subject area that is taught at all. And so my position on that is as China looks to further expand, as it enteres more and more of these major initiatives, but also as it tries to shift the balance between products and services, that is an area where there is a shortfall in the required skill sets.

SPEAKER_00 4:54

Now, I um I think that's uh really helping us frame this conversation, Tim. The gap in the middle, no evidence of uh commercial being a subject area at all. Do you see that, Deborah?

SPEAKER_02 5:10

Not in the slightest. One thing about living in China and working in China for as long as I have is you come to realize that commerce is something that is taught from a very young age. It's not a single subject, it is not necessarily a university degree, but everybody here works towards either establishing or contributing towards a business. And they start very, very young in terms of understanding commerce and relationship. Um, and I mean trying to say that there's no formal education, well, looking at the rest of the world, formal education and commercial management, contract management is also in its infancy in in many, many places. Um China in the last 30-40 years has gone from essentially extreme poverty to being one of the powerhouses commercially from a manufacturing perspective, from a technology, from a patent perspective, that would not be possible if you know there wasn't this underlying want-need drive to understand to excel. So, yes, whilst there may be a lack of a formal qualification, uh many people, when they enter into business here, um will not have the required degree. In my department, for instance, which is contract and commercial management, I have guys that have master's and PhDs in economics, that have master's and PhDs in law, that have master's and PhDs in international relations. It's adjacent to the traditional understanding of what you need to be a contract and commercial manager, but the skill set is there. How to think, what to think, how to draw the relational points. But even beyond that, commerce and trade here, it's not uncommon for kids to go to the market and barter and trade and learn how to contract and learn how to set up the relationships from when they're small. So, yes, whilst there may be a practical um gap from a formal education perspective, I do think that the education here, from a practical perspective, is much better and it starts much earlier.

SPEAKER_00 8:04

Yeah, that's really fascinating that it's sort of embedded from a very young age, as you say. I'd I'd love to pick on on, if I might, um, Tim, this sort of rapid pace of change because the commercial capabilities have developed in a relatively short time frame. And how should we think about this sort of compressed evolution, Tim? Does speed of development create structural weaknesses in areas like governance and lifecycle management, or can it actually become a competitive advantage?

SPEAKER_01 8:42

Well, I think there's tremendous opportunity for competitive advantage, but I have to pick up on um uh Devrane's comments there because I think it is illustrated precisely the problem. Um, we see very much the same, uh, for example, in India, another major global economy. But actually, they have started, of course, from a very different place. They started really much more with services than with product. So they're a reverse of China in that sense. But their sophistication from a commercial point of view is quite clearly not, has not been tremendous. It's been a long, continues to be quite a significant learning journey for India. Why? Well, very much like China, uh kids from a very early age are taught to do deals, to go to the markets, to barter. Um, so I fully appreciate the point Deborah has making, but sophisticated international commerce is not about bartering. Um, if you are looking and requiring the development of longer-term sustainable relationships, actually a barter culture is the antithesis of what you need. You need greater openness, you need greater transparency, you need to appreciate the core principles of negotiation, not just bartering. Bartering is symbolic of a commodity-based environment where price is everything, price and quality are everything. But it is not the way you set up and establish a long-term relationship. And certainly, from the insights we have, from the research we do, from talking with organizations that actually frequently are uh in negotiations with China, um, it is problematic. The readiness of most Chinese entities, enterprises, for example, to share data is fundamentally missing. Now, uh I appreciate in Deb Moran's case, Huawei has really made some incredible steps. I have tremendous admiration for the commercial skill set that have observed at Huawei and the intelligence of the questions that are asked. Um, but that is certainly not universally true across Chinese business, which still tends to be driven much more by that um bartering risk transfer mentality.

SPEAKER_00 11:25

Thank you, Tim. Deborah, what are your thoughts on on what Tim has just talked about?

SPEAKER_02 11:33

Everything you said is true, um, but by the same token. It's not stagnant. Um Chinese enterprises have learnt a lot and are continuing to learn from business that they do externally. Um and the Chinese government has also been very, very responsive in terms of looking at uh things like IP, for instance, intellectual property and intellectual property rights. They actually set up three international um IP courts in China. One of them is in Shenzhen, um, and they rule, I think, 65% faster than any of the IP courts outside, um, where there has been uh analysis done on the rulings and the rulings from external um observers who actually found it to be more fair than those that are done either in Europe or in the US, where they have found a bias towards companies that are also US or European based. Um the thing about China is governance is now a very, very big thing. And it's baked into not just an expectation, but from a government standpoint. And it's one of the things that I appreciate that both from a company perspective where I work, but also from an operating environment where we are. Um, they see what works elsewhere in the world, they pull the best practice, they adopt that, and then they implement it. If it works, fantastic. If it doesn't work completely, they tweak it. The sometimes consensus is a bad thing because you end up gaining consensus on the very thing you don't need and you don't want, as opposed to having a quorum reach with a few key people, a direction is decided, it is adopted, and then lessons are learned from there. And that's one of the nice things that I like about working here and also working in China, is that I get a great perspective on what's being implemented elsewhere in the world, what has worked from a case environment, and how that is then analyzed and applied here. Um so yeah, is there a way to go? Yes, but the same applies for the rest of the world. Um, you know, contract and commercial management may be on the lips and minds of companies in the Americas and also in Europe, but often it's more lip service that is driven from a financial perspective than actual true understanding and application of what contract and commercial management should be. Governance, for instance, is not driven by contract and commercial managers, it's purely driven from a fiscal responsibility perspective. Um IESBA, for instance, that's where all of the ESG and financial reporting and human rights and that is how it is being implemented in contracts. It's not driven by us as an industry. It's driven by finance and lesser legal.

SPEAKER_00 15:36

Does that resonate with you, Tim?

SPEAKER_01 15:41

Yes, I mean I think the um hunger to learn is very evident. The openness to learning and the humility that that implies is so important. You know, I think we obviously only have to look back through the history and recognize that every successful economy has been an economy that's been ready and willing to learn from others. You look at the US in the 1800s, they lacked most of these areas of knowledge and expertise and were extremely good at sending people over to Europe to find out what they were doing and then copy it. Um so this is uh history. Um, and and China is repeating it. Uh and I fully agree with also the extent of uh state enablement is an important ingredient. I mean, you you gave the example of hyper B. We could equally look at areas like uh dispute resolution, where again there have been uh further initiatives recently to really streamline um uh areas of dispute management. Um, and these are really important enablers in any economy because what we see and certainly in Europe with the extent of regulation is the level of friction that's embedded into the system, which is of course anti-commercial. So I think if I just flip back though to the article for a moment, I mean the key point really of all of that was that um not denying that China has the ability, the interest, the uh curiosity, if you like, to become um a commercial powerhouse, um, but that it has got a way to go. And I think was also making the point that for Western competitors, um, and I fully endorse uh again De Moran's point that often uh commercial and contracts tend to be lib service rather than true embedded capability, um, but there is perhaps at least a greater bedrock of understanding of systems um and support. Uh but if that is not something they take advantage of, they're very quickly going to be overtaken by China in commercial expertise in just the ways that they have been in a lot of technical expertise. So we're we're probably um almost dancing on a pinhead here in a shared agreement that actually commercial contract management are increasingly important disciplines that everybody's got and should be investing in improvement, but they're coming from somewhat different perspectives and positions uh as a start point.

SPEAKER_00 18:49

Yeah, thank you, Tim. I'd I'd like to move on, if we may, to um to bring in the human side of this because one of the themes um in the feedback is that relationships often carry as much weight as formal contracts in Chinese business culture, right? Um at the same time, we know that global service delivery depends on clear governance, risk allocation, and enforceable agreements. So, how how do organizations navigate this tension in partnerships? And what happens when relationship-driven models meet contract-driven expectations in these complex multi-year deals? So, I'm going to come to you, Deborah, for your thoughts on that.

SPEAKER_02 19:38

So, I'm going to go back to one of the core principles that WorldCC has been pushing, and that is relational contracting. Relational contracting is at its very core built on the relationship between the parties. The contract itself becomes secondary. As long as the relationship is good and you can communicate with your partner, anything that is within the contract is you have the ability to discuss, to adjust, to come to some kind of compromise. And that that for me is one of the things here that is so amazing. Even in multi-year deal, um, many Chinese businesses will do it a bad deal today, right? Where they're losing hundreds of thousands to build the strong relationship. But 10 years from now, their business is still going. The relationship is that much stronger. Because everything is approached as a potential partnership and not a master and servant diminutive, if you want to call it that. How is that going to work moving into a Western environment? You know, from my own experience, we have always worked with our customers as partners, and we try as far as possible to build the relationship so that it's not vested in a single person and a single transaction, that it is something that is seen as multi-year, regardless of the length of the contract. And that's the big thing. We we see our relationships and we plan our relationships, yes, in the short term. Um, and that has more to do with financials, but we look at longer term initiatives like next five, next 10. And in some cases, we'll even discuss with some of our customers next 20, next 50. And for many businesses, they can't say that. They will say that their relationship is transaction based. Contract work as opposed to the relationship as some contract work in it. And I think that that's the big difference to me.

SPEAKER_00 22:12

Thank you, Deborah. I mean, I'm really interested to hear Tim's thoughts with all the the research and work we've done over the years on relationship uh-based contracting. What are your thoughts?

SPEAKER_01 22:30

Certainly that uh inspires a number of thoughts. So relational culture has again historically always tends to be quite strong within uh the context of a particular um jurisdiction or a particular tribe. Um, I mean, China is interesting because, of course, it isn't really one tribe by any means at all. It's um and it would be interesting, and I don't know the answer to this, that as you look perhaps at the different, uh very different uh cultural origins of different parts of the overall uh uh Chinese state, um, whether there is a stronger relational framework in some areas and between some people than it is with others, but that's perhaps a slightly different point. Um what what we do observe is that the importance of the contract increases substantially as you begin to move across cultures, because then the opportunities for misunderstanding, etc., are greater. So having having increased precision, at least of making sure that we are actually at one in terms of our expectations, you know, the scope, the goals, the mechanisms that we're going to employ to maintain the strength of that relationship, become more important components in its structuring. I think in terms again, then of looking at China and its reputation in the international market, I don't uh in any sense doubt at Deborah Lan's point, and we know again from what work we have done in China that very often the contract in a Chinese context is not especially relevant. And indeed, the experience of China in working with Western companies that have relied on the contract is that that's a pretty risky proposition. Because, you know, certainly there have been points in the past where we've looked at the frequency with which Western companies would simply say, yeah, yeah, I know that's what the contract said, so that doesn't work for me anymore. Um, because they've really taken a position of power historically that said, come after me, come if, you know, come see me in New York courts or in London, good luck. So contracts have been abused, relationships have been abused. I think that obviously has impacted trust in both directions. But the other point I'd like to make about relationship is that if relationships are going to be strong, there needs to be a degree of trust. And for trust to exist, there has to be a high degree of openness and transparency. And one thing that I think we have observed, and we do have regular commentary back from members who work with Chinese companies, is that very often that openness and transparency is missing. But almost in that hunger to learn, it tends to be a one-way street of communication. Um, and certainly my experience of working with China has often been hold on a minute. Um, we've just been talking for an hour and a half, and I don't know any more than I did when I came into the room. It's all been about being questions being thrown at me and me divulging information. So I think, you know, this is where there are some really interesting features and factors, which are, by the way, not unique to China because that is somewhat oriental culture too. Um, you know, I think you often uh similar experience, for example, with Japan, where it has often been a more of a one-way street of sucking out information rather than imparting information.

SPEAKER_00 26:43

That's a really interesting point. Is is there a cultural um is there a cultural point that we're missing that we need to understand better to unlock more of a two-way conversation rather than this one-way street, Deborah Ann?

SPEAKER_02 27:04

Nicely loaded question there, Nikki. Um yes, I I think very, very much so. Many native English speakers or those that have English as a second language view anybody from Asia where Mandarin, Malay, Thai is their first language, and English is maybe a third or fourth. Yeah, they view them as, and this is from my own personal experience, they often view these young looking individuals as being not as qualified, not as capable, and in fact, stupid. Um, because questions are asked. One one of the things that that is a key driver from army recruits here is they talk to ask questions to completely understand. Um, and that is often from a Westerner's perspective, seen as they want information from me, but I'm not getting any information from them. Um we we often approach other cultures not wanting to understand it, but to manage it. And I think that that's one of the big things that people need to appreciate. Um doing business in in a western company, you'll meet at the office, you'll maybe have a coffee in the boardroom, and then you'll go on your merry way once the negotiation is done. Negotiation in an Asian context, very little happens in the boardroom. Maybe doting eyes crossing T. The real negotiation happens at a tea ceremony down the road, or um going out for a dinner. Very little true business is done in the office, and that's where the big mismatch comes in. Uh, many western business people coming to Asia, to China, um, with the expectation that they're going to be in boardrooms. Uh, and then you can't understand why they press that and no business has been done. Then you get other guys who come into the same environment and are just here to experience and learn and spend most of the time going out for drinks, going out for food, going outside things, going to meet people's family. And suddenly they have all of the business that they assume they need to get from the boardroom. But because they were willing to experience and integrate into even in a small way and understand the culture, often wins them a lot more uh favor. It's a word in Chinese called one she. So it's having standings, having presence, and you create that by building the relationship not across the boardroom table, but outside of it.

SPEAKER_00 30:20

That's so fascinating. I love what you say about how we often approach different cultures not wanting to understand but to manage, and I think that is very true. Um, and just to experience and immerse yourself first is to begin to understand and achieve successful outcomes in deeper relationships. Tim, did you want to add anything else to that? I thought that was a a really fascinating point.

SPEAKER_01 30:48

It is. Um I think I think what it reinforces is this point that as we operate across cultures, having cross-cultural understanding in a commercial context is a political attribute. And if we don't have it, we're not going to be able to structure strong um resilient relationships. Um, so I think you know, Deborah Anna has pointed out extraordinarily well the importance of anybody in coming to China, wanting to work with Chinese business, of stepping back, learning, listening, and engaging in ways that are culturally appropriate. That is good commercial practice. And of course, the point is true in the opposite context, too. And um, in many respects, I suppose that goes back to the heart of the article, that at the moment that is not something that's necessarily been as important because um uh up until this point, a very high proportion of uh Chinese trading activity has been in goods. And of course, the article was driven by the point that the um the latest plan is pushing much more towards the evolution of services, where these relationships are going to be far more important. So um I think Debran brings a you know a fascinating and really important component to that conversation with what she just said.

SPEAKER_00 32:36

Thank you so much to both of you. I see I feel like we could carry on having this conversation for much longer, but unfortunately that's all we've got time for today. Um, what's the takeaway here? Um, China's transition isn't happening in a vacuum and it isn't starting from zero. Um, commercial contract management capabilities already exist, um, both from a young age, as Deborah has said. Um, it's in its economy, it's often embedded and evolving and increasingly shaped by this global exposure. But the shift to service-led outcome-based models does raise the bar. It requires not just commercial activity, but commercial maturity, structured governance, life cycle management, and the ability to manage complexity over time. For global organisations, this creates both opportunity and urgency. The advantage may not come from assuming a persistent gap, but from recognizing a moving target. Because the real question isn't whether China will close the gap, it's how quickly and who will be positioned to compete when it does. So thank you so much for joining us today, Deborah. Thank you, Tim, and thank you, audience, for listening. And if you like what you heard, stay tuned for our next episode where we'll continue to explore the ideas, innovations, and leadership shifts shaping the future of commerce and contracting. Until then, keep challenging, keep adapting, and keep leading.