Can I Do Business in China? A Checklist.
Doing business in China opens up unlimited possibilities for business growth. It also exposes the unprepared investor to significant risks.
Doing business in China opens up unlimited possibilities for business growth. It also exposes the unprepared investor to significant risks. Our years of experience helping countless ventures to get off the ground and succeed in China led us to develop the following rough checklist for businesses considering start-up or expansion in China. Overall, of course, the best strategy is to reduce risk by “doing your homework” before committing to a venture, and using qualified help to guide you and negotiate effectively on your behalf. Which entity is the contracting party with the Chinese party? Has adequate, moreover, thorough due diligence been performed on the Chinese party? Has careful consideration been given to the type of corporate entity formation that will enter into contract(s) with the Chinese party? Have tax considerations and “best practice” strategies been implemented to minimize tax impact? Is approval (an essential criteria) from local, provincial and/or the Central government of China been well contemplated and implemented, which enables legal effect of the contractual relationship? Have financial obligations and risk mitigation strategies been clearly conveyed to the foreign investor in the event of uni- or bi-lateral termination of the contractual relationship with the Chinese party? Are proper and strong procedures in place to protect the foreign investor’s intellectual property rights and protection of trade secrets? Does the foreign investor have expectations, or any awareness that under-the-table payments might be required by the Chinese side? Are tactical and strategic plans contemplated to deal with such payment issues? Has the foreign investor anticipated an adequate and satisfactory process for dispute resolution; and if so, in which forum(s) is it anticipated that disputes will likely be heard? Does the foreign investor have local personnel on the ground that can and will continually monitor, acting as “eyes and ears” for the foreign party, relative to the regular operation of the Chinese-Counter Parties business operations, which are the subject of the contractual relationship? Are proper financial auditing and controls developed to ensure that reported projections and actual numbers reflect the complete and true status of the operation? If the project involves output for export, are proper QA procedures and operations clearly understood and accepted in writing by the Chinese party? Is monitoring of said ongoing “procedures and operations” not only contemplated, but, does an “action plan” exist in writing to ensure general and specific compliance?