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China Business Due Diligence

Updated:2018-7-2 17:54:30    Source:www.tannet-group.comViews:1783

China business due diligence is one of Tannet's buseiness services. Due diligence refers to a kind of investigation on a business or person prior to signing a contract, or an act with a certain standard of care. Conducting this type of investigation could contribute greatly to sound decision-making, on the basis of the information or data available to decision-makers.

China Business Due Diligence - Main Types
According to different purposes for the investigation, due diligence could be generally classified to types as below:
A. Commercial due diligence;
B. Financial due diligence;
C. Operational due diligence;
D. Integrity due diligence.

What you should do for Due Diligence
Due Diligence can be a legal obligation, but the term will more commonly apply to voluntary investigations. There are some things you should do for this research.
1. Initial Internet Search
The first thing you should do is conduct a Chinese-language internet search of your potential Chinese counterparty. This sort of search is not likely going to be enough to make you feel good about going forward with a $10 million deal, but it frequently can give you enough negative information on your potential Chinese counterparty to convince you not to do any deal at all.

2. Checking Financial Status of Related Parties
Next, do your due diligence the old fashioned way. Ask your potential Chinese counterparty to provide you with its government registration documents and, if relevant to your deal, its accounting and tax records as well.

What you should bear in mind for China Business Due Diligence:
A. Construct your own fraud scenario. Ask yourself how the Chinese company could have staged everything it has shown you.
B. Focus on the operations. Look carefully at the Chinese company’s operations.
C. Get the official records yourself. Use your own people to get the Chinese company’s official corporate records from the official Chinese government sources.
D. Take company-provided introductions with a grain of salt. Speak with your target Chinese company’s vendors, neighbors, employees, and customers, especially those you find on your own.
E. Speak with the Chinese company’s competitors. Competitors with real businesses can and usually will tell you about their competitors, but, of course, any information gleaned this way should be taken with at least a bit of salt as well.
F. Do not delegate. Use your own trusted network to gather information on your potential Chinese counterparty. If you don’t have such a network, get one. If you can’t get one, don’t do the deal.

Contact Us
If you have further inquires, please do not hesitate to contact Tannet at anytime, anywhere by simply visiting Tannet’s website, or calling Hong Kong hotline at 852-27826888 or China hotline at 86-755-82143422, or emailing to You are also welcome to visit our office situated in 16/F, Taiyangdao Bldg 2020, Dongmen Rd South, Luohu, Shenzhen, China.

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