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Many years ago I was representing a very large Korean company in a very large legal dispute with a very large American company. The first day, we negotiated all day. The second day, we were getting close to a deal and my Korean client (the in-house lawyer who headed up the international department of the Korean company) invited the American negotiating team to lunch. The Americans politely declined, saying they wanted to work through lunch. We negotiated into the evening. By the third day, things were going extremely well and by around noon we had reached agreement on ALL of the major issues. My client invited the American team to lunch and they again politely declined.

My client had a couple of stiff drinks at lunch (I had known him for years and never seen this in him) and we returned to the office to -- I thought -- wrap everything up and have a big signing ceremony. We get into the room and the Americans said something. I cannot remember what it was, but it was something unbelievably unimportant, maybe like when we sign this agreement we will need two originals. Whatever it was, my client slammed his notebook shut and announced, "we are out of here." The American team looked at me for an explanation, but I had none.

It took me hours, but my client finally told me what was up. The Americans declined the lunch on the second day, which was rude. On the third day, the Americans should have invited us to lunch, but they didn't. We went out on a limb by inviting them and yet they still declined. This was wholly unacceptable. It took another month of negotiating between me and the American company's outside counsel for us to resolve everything. Part of the resolution was a letter of apology from the President of this Fortune 500 American company and an agreement that the President would come to Korea to sign.

So while I might not have an insider's perspective of what happened in this instance you describe, I believe it happened.

I will add, however, that the Chinese are generally less concerned about such things than Koreans, but, loss of face is still very important.

Back in the 80's I joined an Australian firm which had bought an old English trading group which had its roots back in pre-Revolution Shanghai.

This group had a respectable volume of trade with China which it had hitherto conducted via mail from London augmentated by an annual visit to the Canton Fair.

As such they were venerable China traders and I looked forward very much to working with them. I had worked hard at my craft, picking up a post-graduate qualification in Chinese politics along with study of Chinese both in Australia and Beijing. I had worked for three years prior to joining them in Beijing for another Australian firm of trade consultants.

Imagine my surprise when I found them all illiterate, not only in Chinese, but in any of the lore of doing business with Chinese. Any advice I gave them they just shrugged off with the remark that the Chinese just had to learn to do business the 'international way'.

At Chinese banquets they would demand forks to eat with. If they were the host, they would just point to the table and tell their guest to 'sit anywhere' even when I had taken special care to draw up seating arrangements.

They were so contemptuous of any sensitivity to the 'Chinese way' of doing business I was just profoundly shocked.

When I moved to Hong Kong and met some of the old expatriates, I began to understand this a little better. Apart from a few chaps who had 'gone native', the expatriate Britons preserved a complete distance from locals and strove with all their might to maintain every detail of their Brtitish lifestyle.

Local businessmen who worked closely with them were routinely referred to a 'boys'. They treated them with the same reserve they treated all but social equals, i.e. those who had gone to the right schools.

So in that context I had to conclude that their Chinese counterparts were simply used to them and accepted this crassness as the price of doing business with foreigners.