Now, I've been doing business in China for some 14 years now, and have assisted numerous companies in securing Chinese suppliers. In every instance, I advised the foreign companies to take an extended period of time to check out the Chinese suppliers -- to build relationships with them, to become familiar with their reputation and practices, to begin with smaller 'test' orders before proceeding to larger orders, etc.
You see, people seem to assume that doing business in China is like doing business back home: you find a supplier, negotiate a contract, sign the contract, then your job is done. ANYONE who does business in China in this manner is just begging for trouble. I have spent years as a cross-cultural consultant, and far, far too many foreigners underestimate or entirely ignore the importance of cultural differences in doing business.
So here's a primer, for anyone interested: number one most important rule in doing business in China is to understand the importance of relationships, and in understanding how Chinese view responsibility. In China, the Confucian ethic still reigns supreme: thus, you have the greatest responsibility to your government first; then to your immediate family (parents/grandparents, siblings, children, etc.); then to your immediate community (the town you live in, friends, etc.); and continuing in ever-increasing circles (your province, your country, etc.).
Now, if you're not part of the immediate "community" surrounding me (either family, or friend), then I have little responsibility towards you at all. I can lie to you, cheat you, etc., and there is no loss of face. The idea of the Golden Rule, "Do unto others as you'd have them do unto you", is foreign to this culture. Chinese will go to exceptional lengths to avoid damaging a relationship with someone who is within their immediate circle of relationships/responsibilities; but will feel no guilt whatsoever at robbing anyone else blind.
An example, to illustrate: when I first came to China, and I was learning Chinese, there was a small shop just outside of my university's main gate where I often went to buy snacks/drinks, and where I liked to practice my Chinese with the shopkeeper (who was a guy about the same age as me). For over a year this went on and on, slowly building a relationship with this guy. After a year, we became 'friends', and he invited me to go to his home to meet his family and have dinner with them.
After dinner, we were sitting around singing karaoke on their home karaoke machine, when he suddenly pulled out his wallet, and handed me a wad of cash. I was stymied, until he explained that for the past year, he'd been systematically over-charging me for things I bought in his shop. Now, so long as we were not "friends", he had felt no guilt whatsoever about doing this; but once be became friends, he felt an immediate obligation to correct this, despite the fact that I would have remained unaware of it had he not told me.
Negotiating a contract, or doing business in general, is almost pointless if you aren't going to take the time to first build relationships with the Chinese people you are working with. For me, I wouldn't trust the most complete, thorough contract ever written, if I don't have a relationship with the person I'm doing business with first; conversely, if I have a strong relationship with them already, I wouldn't even see a need to have a contract.