Due diligence is an absolute must if you plan to team up with a Chinese partner. Its a jungle out there, so be wary. This is no place to cut expenses or rush through things because a half-done job may cost you twice as much time and money later. Due diligence is not a particularly prevalent practice among the Chinese and they may have trouble understanding why you are making things difficult. If your prospective partner refuses to cooperate, dont be afraid to walk away.
There are three main types of due diligence that you need to concern yourself with financial, legal, and environmental. Keep in mind that these three inquiries often overlap.
Financial Due Diligence
Many Chinese enterprises (it is said) have three sets of financial records: one for the
owners, one for the tax authorities, and one for foreign investors. Accordingly, determining the value of an enterprise based on its financial records can be difficult. It might be necessary to carry out an independent assessment of the enterprises reputation, connections, and key employees.
Key pitfalls to watch out for are:
Double-dealing employees it is not at all uncommon in China for...
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