How to assess your business partner

Checking the credit history of Chinese companies can be challenging, if not impossible . Credit agencies claim that they have special contacts that will ensure accuracy in their reporting of the credit status of Chinese companies. However, it is always advisable to check with different sources and to crosscheck the results, if having a good and thorough understanding of your partner's financial situation is essential. In cases of exporting to China, the best proof of a company's credibility is whether or not the Chinese company is able to open a letter of credit from the bank. If so, you can save the effort of checking the company's financial standing because the opening bank will have done the job.

If you want to establish a business relationship which goes further than simply exporting to China, you may need to understand more than the financial situation. Other elements such as the vision the company has for the market, the management team and its possible terms of service, corporate background and relationships with suppliers and distributors. In many cases, observation of interpersonal relationships, the manufacturing site and the office area will give you a reasonable level of intelligence for judgmental evaluation. Talking to suppliers and distributors / agents , and even a customer or two, can be very useful for gaining an understanding of your partner.

In some places, there is a system of misconduct blacklists erected for the purpose of establishing good business credibility. In Beijing, for example, the Beijing Administration of Industry and Commerce launched a Misconduct Record System in July 2001, blacklisting those who have been caught engaging in illegitimate economic activities or misconduct. Some banks also maintain a blacklist of companies or persons who fail to honour loan repayment contracts.