Due Diligence: A Must for Doing Business in China

For Canadian companies looking to do business in China, no matter the business model, whether through trading, investment or joint research, the key is to find the right partner. How do you do that? With due diligence.

Due diligence in China can include:

  • Operational due diligence to confirm identity and legitimacy of business partners.
  • Financial due diligence when considering joint ventures or mergers and acquisitions.
  • Governmental due diligence to ensure that your business plans and interaction with Chinese authorities will not lead to inter-governmental conflicts down the road.

Based on the Canadian Trade Commissioner Service’s experience in China, Canadian companies involved in problematic cases could have avoided or minimized their issues through thorough and extensive due diligence at the front end of their business planning.

Due diligence is an essential first step for Canadian companies doing business in China. You may find a local partner on alibaba.com, elsewhere on the internet, or through referrals by friends but the fact remains that due diligence is required to reduce the risk to your business.

The following contains some situations that careful due diligence can help you avoid: Frauds and Scams in China.

See also our Fraud Awareness in China page.

While China’s legal systems has made great progress in becoming more business friendly, legal and regulatory enforcement in China can still be unsatisfactory. As a result, prevention and preparation is key to success in the Chinese market. Due diligence is a prerequisite for any transaction with Chinese parties.

Where can you get assistance with due diligence?

  • The Canadian Trade Commissioner Service in China can do preliminary research on a local company from public sources. In order to perform our research, we need to know the Chinese name and phone number of a local company. We can then investigate whether or not the company has registered with their local State Administration of Industry and Commerce (SAIC), government agency in charge of all business registrations in the city, how much registered capital the company has, who the chief representative is, how long the company has been registered, what type of phone listing they have [mobile only as opposed to a landline, which would indicate in some way the reliability and longevity of the firm].
  • As we are not mandated to conduct a thorough background check on a local company, we can provide you with a listing of firms that perform company background checks from our listing of Credit Checks and Debt Collection Services.

For more information on how to conduct due diligence in China, read our Due Diligence: Best Practices and A Checklist for Conducting Due Diligence reports.

For more information on frauds and scams in China, read our Fraud Awareness in China report.

If you have any questions or would like to learn more about the services offered by the Trade Commissioner Service in China, please feel free to contact us.