Due Diligence is and has always been important factor for foreign companies operating in China. Establishing a stringent due diligence process for prevention and preparation will help your business to successfully compete and operate in China.
If your business undertakes any kind of financial transaction with Chinese companies or parties, due diligence is a prerequisite.
Business in any foreign territory can be a risky affair, especially when vetting potential business partners. Even if you have vetted your partners, due diligence can still be used to strategize or to get the best deal during business negotiations.
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Corporate Due Diligence in China
China is not an open house for all foreign companies, so it’s important to gain essential local knowledge on setting up a managing a business in China. You will need access to a professional service providers to help you conduct due diligence on potential partners, or even for agents or suppliers of goods and components that will be pivotal in your supply chain.
Due diligence is often an ongoing process that you will need throughout the entirety of your operations in China. It’s not just a one-off process for starting up in China. The market changes, so will your business partners. A company or supplier that is viable today might not be tomorrow, and ongoing due diligence can keep atop these important issues for your company. It needs to become an integral part of your business practices in China going forward.
China Financial Due Diligence for Foreign Companies
Financial due diligence is administered via investigations that target a certain company or an investment opportunity to see if it’s reliable and trustworthy. Is it financially sound? Have all the risks been identified? These are all major components of a due diligence audit.
Most foreign companies in China have to undergo periodic reviews from professional and financial service providers, but who can you trust with your accounting? Chinese subsidiaries routinely need to depend on in-house accounting. We can help you to keep your accounting reviews in order and above board by ensuring that your bank transactions, accounting records, tax records, and payroll comply with the local financial regulations.
Any findings we discover can be shared with your key company personnel at your abroad headquarters. And when dealing with the Chinese subsidiary, we are here to provide a direct path to answer any questions. Our focus is on prevention, and we offer this service to avoid any potential fraud issues and for general risk management. Prevention is better than a cure is our philosophy.
Financial fraud in China can happen across all manner of business and financial transactions. It can be internal or external and is sometimes rife at larger commercial companies or when 3 rd party agents are involved. This is why we use preparation and prevention when foreign companies in China are planning to conduct business here.
All manner of information can be spread over a litany of different agencies or databases, some of which might need special authorization just to access it. The data could be scattered across public or non-public records or even national or local databases. If the data that needs accessing is related to court cases of blacklists that are only dealt with in China, it can be a nightmare to compile everything under one banner. You might be surprised to learn that Chinese commercial entities do not need to disclose much company info publicly as they do in North America or Europe, so it can be difficult to find and obtain if you don’t understand the local lay of the land.
All manner of information can be spread over a litany of different agencies or databaThe limited access of information for public actors means that foreign investors are expected to use a professional and certified service provider to administer and run a due diligence investigation. It needs to be transparent so that the investors, suppliers, business partners, and even personnel are legitimized.es, some of which might need special authorization just to access it. The data could be scattered across public or non-public records or even national or local databases. If the data that needs accessing is related to court cases of blacklists that are only dealt with in China, it can be a nightmare to compile everything under one banner. You might be surprised to learn that Chinese commercial entities do not need to disclose much company info publicly as they do in North America or Europe, so it can be difficult to find and obtain if you don’t understand the local lay of the land.
Our professional and licensed tax advisors and specialists can provide foreign companies operating in China with in-depth and trusted reviews on these issues. We perform these reviews on a regular basis every month, quarterly, bi-annually, or even annually. We provide necessary support with a team of reliable and proven professionals with track records for in-depth due diligence. The service we provide is for accounting work and supporting your company in terms of answering questions or helping head management back at headquarters to fully understand complex and sensitive issues so everything is clear, concise, and transparent at all times.
Third-party vendor Due Diligence in China
Another important factor to take into consideration is external fraud that takes place outside of your company. This is usually committed by 3rd parties. A great example of this issue would be when advantage is taken of lenient customers by an outside supplier you work with. Foreign companies getting deceived by local suppliers is not a new issue. In fact, it’s something that can happen regularly. This could be goods not being delivered as promised or even goods delivered with quality issues or defects. This could also cover internet fraud when the fraudsters disguise themselves as suppliers.
We can help you to reduce these risks and to uncover external fraud. It is standard for us to perform an undercover investigation of the said supplier to find any potential fraud issues. We will review the Administration for Industry and Commerce (AIC) records to try and verify the supplier and to learn about their financial performance. We can also get references from their existing companies or customers to find out their previous business processes to see if they are reliable.
Due Diligence for Joint Ventures in China
Legally conducting due diligence before investing or starting a business in China is not just a smart idea, it’s a prerequisite. Of course, we conduct due diligence to see how the companies perform and operate and to see if they are a viable potential business partner, but it’s much more than that. We can also surmise if the said company operates with high values and if any changes are needed to ensure compliance with Chinese authorities and the international standards that pertain to the foreign investor.
Due diligence will also give you that special peace of mind to know you are on top of the situation or any potential circumstances that could seriously and negatively affect your venture into the Chinese markets. Due diligence can raise any concerns while giving you a clear blueprint on what’s expected and what needs to be done in order for you to compete legally and successfully as a foreign company in China.