Do Your Due Diligence
Always perform due diligence when evaluating the capabilities of a potential supplier or partner. Some people in China suggest that companies should conduct due diligence twice. Although we don’t think that suggestion is appropriate, you must be very thorough — even ruthless — in your research.
You can perform different types of due diligence — for example, financial, legal, technical, background, and environmental. If your company has the technical capability, you should be able to perform technical due diligence yourself.
Legal due diligence can cover a wide range of items, from asset titles to legal compliance. You can do minimal legal due diligence when evaluating a potential business arrangement by going to the Administration for Industry and Commerce (AIC) and looking at the business license of the other party. The license can tell you who’s authorized to sign contracts for the company and who the owners are (which may differ from what you’ve been told), and it can give you an idea of the company’s financial strength. Most other forms of due diligence require professional assistance. See Chapter 17 for details.
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