Chapter 4.4: Due Diligence for Market Entrants

Li Yong, Deputy Secretary General, China Association of International Trade, and Jonathan Reuvid

Introduction

Interest in the China market arises from different causes, but is often not the result of serious study and informed discussion. Imagining the size of this market would excite any CEO and the simple maths of tapping into a tiny fraction of it may prompt a visit to China. It might be thought that such a visit can only be beneficial to both sides, but unfortunately this is not always the case. If the homework has not been done to prepare for the visit, and the mission is not supported by experienced and honest advisers, the stage may well be set not for the jump-start of a successful new project in China but for a series of delays and disappointments based on false expectations and misunderstandings on both sides.

It is true that the China market presents many opportunities in terms of trade and investment. However, lack of understanding about the market is often the cause of failure and can thwart closely calculated business plans. Thorough due diligence is of crucial importance in shortening the learning curve and minimizing possible risks. In this book, there are many chapters that focus on the complexity and intricacies of doing business in China and provide insightful comments on how a company should approach the market. This chapter intends to provide for new market entrants an additional and different perspective on what due diligence is needed. These may be over-used clich s but an ounce of prevention is worth a pound of cure and a stitch in time does save nine. The point to emphasize is that due diligence is a much wider concept here than is generally realized. It is not a partner-specific investigation effort, but an endeavour to widen the scope of understanding about the market.