Checklist for due diligence on Chinese Manufacturers / Suppliers
China has been labelled as the World Factory for more than a decade. Whatever you can think of, it is most likely that you can find it being manufactured in China. Moreover, the internet provides a perfect tool to identify a long list of self-claimed Chinese manufacturers with decent websites in a second. However, foreign companies sometimes find themselves lost in a vast sea of choices, and could end up with faulty products imported from China or work with a “suitcase” company- a Chinese term to describe fraudulent/fake businesses.
The key word is qualifying. Conduct due diligence on your Chinese manufacturing partners/suppliers before you sign the contract.
Here are some factors you must include in your due diligence on Chinese manufacturers / suppliers:
- Is the business a genuine business? Obtain a copy of their business licence and, if possible, check with the local Commerce and Industry Administration Bureau on the legitimacy of the Chinese business.
- Is the business a manufacturer? Smart Chinese middlemen understand you would like to cut down costs and go directly to the manufacturers. Hence they may work on a manufacturing site picture, put it on their websites and claim they are manufacturing what you need. Again obtain the copy of their business licence to check their business scope and/or investigate with local government agencies/industry bodies directly or through a Chinese business consultant.
- Does the Chinese manufacturer have surplus manufacturing capacity and capabilities to meet your current and potentially growing demand? Check with the staff of the company on their manufacturing capabilities. If you are placing big orders and/or look at working with a long-term manufacturing partner, it is worth visiting the Chinese manufacturers to better assess their manufacturing capabilities.
- Does the Chinese manufacturer have quality control systems in place? Do they have an international quality accreditation? Obtain a copy and check with the appropriate authorisation organisation.
- Is the Chinese manufacturer a reputable business in the industry and protect clients’ intellectual property? Check with industry bodies, their clients and suppliers and conduct secondary research to find information on the company’s reputation.
- Is the Chinese manufacturer committed to work with you? If your business is not vital to them, you are at the very bottom of the list when they prioritise orders and hence may delay the production or delivery for your order during peak time.
For assistance with due diligence on Chinese companies or further information on doing business with China, contact Sara Cheng, Manager-Greater China Region, Australian Business Consulting Solutions, Email: firstname.lastname@example.org or call 1800 505 529