Before doing business with a Chinese company, thorough due diligence is essential. This checklist covers what to verify and how to investigate potential partners, suppliers, or acquisition targets.
Basic Company Information
Registration Verification
- Unified Social Credit Code (USCC)
- Business license validity
- Registered capital (paid-in vs. subscribed)
- Business scope alignment
- Registration date and history
Corporate Structure
- Shareholders and ownership percentages
- Ultimate beneficial owners
- Related party relationships
- Subsidiary and branch structure
Key Resource: The National Enterprise Credit Information Publicity System (NECIPS) provides free access to basic company registration information.
Financial Due Diligence
Financial Statements
- Audited financial statements (3 years)
- Revenue trends and profitability
- Asset and liability analysis
- Cash flow patterns
Tax Records
- Tax registration status
- Tax payment history
- Outstanding tax liabilities
- Tax incentives or disputes
Banking
- Bank account verification
- Credit history
- Outstanding loans
- Guarantees provided
Legal Due Diligence
Litigation Check
- Pending lawsuits
- Historical litigation
- Arbitration cases
- Administrative penalties
Regulatory Compliance
- Industry licenses and permits
- Environmental compliance
- Safety certifications
- Import/export licenses
Intellectual Property
- Trademark registrations
- Patent ownership
- IP disputes
- License agreements
Operational Due Diligence
Physical Verification
- Site visits to offices/factories
- Production capacity verification
- Equipment and inventory check
- Employee headcount
Key Contracts
- Major customer contracts
- Supplier agreements
- Lease agreements
- Employment contracts
Red Flags to Watch
- Recently registered company
- Registered capital much higher than paid-in
- Frequent shareholder changes
- Multiple legal representatives
- Address doesn't match business type
- Abnormal business scope
- Listed on credit blacklist
- Reluctance to provide documents
Information Sources
- NECIPS (free government database)
- Court judgment databases
- Trademark/patent databases
- Commercial databases (Qichacha, Tianyancha)
- Industry associations
- On-site investigations
Due Diligence Report
A comprehensive report should include:
- Executive summary
- Company overview
- Financial analysis
- Legal status
- Risk assessment
- Recommendations
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Contact MeDisclaimer: This article is for informational purposes only and does not constitute legal advice. For advice on your specific situation, please contact me directly.
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