Risk Management of doing business in China

High profit comes with high risk. How to avoid unpredictable risk when you are doing business in China? How to evaluate your customers in China when you do not have any Dun and Bradstreet (D&B) to proceed credit check for you?

I have received a RFQ from Kunming at Yunnan for VOIP product RFQ few days before. This customer told me they have an urgent order for VOIP product and ask for a quick quote. The strange thing is they asked me to fly into Kunming for contract sign off. My instinct told me that I need come out some check about my client. I did some company check either with them and indirect with some referral channel. Few days later my client called me that his company can’t provide me some financial information I requested, even then bank account information. This fraud business come to an end but it will keep happening on other suppliers / customers somewhere if you do not have basic check before your business started..

Here are some recommendations we suggest when you evaluate your suppliers / customers in China though most of them are honest in business.
1. Check company registration No. and Issuing Authority. This is start point to ensure your counterpart are registered
2. Company profiles, managing team contact name and telephone
3. Banking information
4. Other customer referral if any
5. Do they have export/import license to sell / buy abroad. China have restriction on foreign exchange reserved
6. If your counterpart needs to sign a contract with you, what will be the dispute resorted court and governing court? You need to put all the lawsuit cost into consideration. If you put all the governing court at your company local court though it will be favored yourself but need to consider efficiency to execute all the loss you have with your counterpart from their court.
7. Evaluate your debt bearing capability if your account receivable can’t be collected from China suppliers / customers.
8. You need to have someone is fluent Chinese documents and business to review those document on behalf of you if they can not provide English document. Even documents in Chinese can also have some fraud information from my past experience.

We can provide more in depth suggestion to help you in evaluating your risk when you start your business in China. Please e-mail to info@webinchinese.com with your questions.