How can I find a good Chinese business partner?

Note: IPO Pang’s Trident division distress management services have been consolidated into IPO Pang’s overall services in an effort to bring more comprehensive service to all our clients.


 

Q. Many foreign companies that come into China rely on Chinese partners in one way or another. What advice would you give a foreign company in finding a good partner?

A. Well, I think as with many things in life, an ounce of prevention is worth a pound of cure. Things are not always as they seem.

Q. You are referring, I assume, to due diligence?

A. Yes, exactly. Let me give you a quick example. Let’s assume that I’m a foreign company and I want to identify a source of widgets in China. So my initial research tells me that there are 50 companies in China all claiming to be the biggest and best widget manufacturer in the country. Obviously this can’t be the case. I know that some of them are completely bogus, some of them are wholesalers masquerading as manufacturers, and some of them are genuinely manufacturers, but only one or two of them can be the biggest or the best. So the difficulty that I have as a foreign company is sorting the wheat from the chaff and finding out which one is accurately representing its capabilities.

Q. As always, let the buyers be aware. But isn’t due diligence a standard business practice that everyone should do whether in China or in elsewhere?

A. Well, you’re absolutely right. I mean, due diligence has been a key element of deal making all over the world for a very long time. The difficulty for the foreign company is that things in China are not so public, things are not so transparent. So if I want to know if a company’s registrations, licenses, certificates, and so on are legitimate, or if I want to know the legal history of the company or perhaps its chief executives, it’s very, very difficult for a foreign company to get that kind of information.

Q. So how can a foreign company get the information that it needs?

A. That’s exactly the kind of work that Trident and it’s parent IPO Pang perform on a regular basis. We have people on the ground, we’re very experienced at determining who is legitimate, who is real, and sharing that with the foreign clients. Obviously the due diligence process takes a little bit of time and a little bit of money, but I can assure you it’s one of the best investments you could possibly make if you’re considering a Chinese venture.

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