China - Due Diligence China - Due Dilligence
While China is one of the most promising global markets, it is also one of the most challenging environments for American companies. Many U.S. companies are able to profitably enter and operate in the Chinese market, but each year a large number of firms face serious difficulties that result in costly and disruptive local business disputes.
A large number of these disputes may have been successfully avoided through standard due diligence. The primary causes of commercial disputes between Chinese and American companies include breach of contractual payment obligations, irregularities in accounting practices, financial mismanagement, undisclosed debt, and the struggle for control within joint ventures. These problems can be minimized by investigating the financial standing and reputation of Chinese companies before signing contracts or entering into partnership agreements.
Both U.S. and Chinese service providers with offices in China conduct due diligence investigations. The fees charged by these companies should typically be considered a worthwhile investment to ensure the local customer or partner is financially sound and reliable. As part of the overall due diligence process, the Department of Commerce is able to assist American companies in evaluating potential business partners through the International Company Profile (ICP) service. As a general rule, USFCS strongly encourages more due diligence in China than American companies would typically need in the United States or most other international markets.