Due diligence on Chinese Companies

A Hot Tip about Business Administration in China

Last updated: 27 Jan 2011

Checklist for due diligence on Chinese Manufacturers / Suppliers

By Sara Cheng

China has been labelled as the World Factory for more than a decade. Whatever you can think of, it is most likely that you can find it being manufactured in China. Moreover, Internet provides a perfect tool to identify a long list of self-claimed Chinese manufacturers with decent websites in a second. However, foreign companies sometimes find themselves lost in a vast sea of choices, end up with fault products imported from China or work with a “suitcase” company- a Chinese term to describe fraudulent/fake businesses.

The key word is qualifying. Conduct due diligence on your Chinese manufacturing partners/suppliers before you sign the contract.

Here are some factors you must include in your due diligence on Chinese manufacturers / suppliers:

  • Is the business a genuine business? Obtain copy of their business licence and, if possible, check with local Commerce and Industry Administration Bureau on the legitimacy of the Chinese business.
  • Is the business a manufacturer? Smart Chinese middlemen understand you would like to cut down cost and go directly to manufacturers. Hence they may work on a manufacturing site picture, put it on their websites and claim they are manufacturing what you need. Again obtain the copy of their business licence to check their business scope and/or investigate  with local government agencies/industry bodies directly or through China business consultant.
  • Does the Chinese manufacturer have surplus manufacturing capacity and capabilities to meet your current and potentially growing demand? Check with the staff of the company on their manufacturing capabilities. If you are placing big orders and/or look at working with a long-term manufacturing partner, it is worth visiting the Chinese manufacturers to better assess their manufacturing capabilities.
  • Does the Chinese manufacturer have quality control system in place? Do they have an international quality accreditation? Obtain a copy and check with the authorization organization.
  • Is the Chinese manufacturer a reputable business in the industry and protect clients’ intellectual property? Check with industry bodies, their clients and suppliers and conduct secondary research to find information on the company’s reputation.
  • Is the Chinese manufacturer committed to work with you? If your business is not vital to them, you are at the very bottom of the list when they prioritize orders and hence may delay the production or delivery for your order during peak time.

 

For further information or assistance program for doing business with China, please visit Sara’s blog http://ChinaSolutions.wordpress.com


Useful links:

Posted: 13 January 2011, last updated 27 January 2011

See more from Business Administration in China

Expert Views    
Mustknows about business set-up in China   By Sara Cheng, Consultant
How to Speed Up Your China Business   By Sara Cheng, Consultant
Hot Tips    
Due diligence on Chinese Companies   By Sara Cheng, Consultant
How To Get Your Money Back From Clever China Cheaters...   By China Fraud Patrol
Latest News    
Recognizing A Chinese Scam   By China Trade Commission