For foreigners running startups in China’s trade industry, achieving success can be challenging, with some even facing bankruptcy. To help you navigate the complexities of sourcing in China, we’ve compiled the top three tips based on our analysis of various cases we’ve handled. By following these recommendations, you can mitigate risks and improve your chances of a prosperous venture.
1. Conduct Thorough Due Diligence
Performing due diligence is paramount before engaging with sellers or brokers in China. Don’t rely solely on their self-presentation; instead, dig deeper. Request copies of their business license or Chinese company name and verify their authenticity on the government database ( http://www.gsxt.gov.cn/index.html ). Additionally, leverage apps like qichacha (企查查) and Tianyancha (天眼查) to gather further company information. These apps provide valuable insights, and their VIP services offer more detailed data. Consider hiring a local Chinese lawyer or consulting with Chinese friends for assistance. The primary objective is to ensure you’re dealing with a legitimate company rather than falling victim to fraudulent practices.
2. Establish an Enforceable Purchase Contract
While China courts are reluctant to enforce judgments from other jurisdictions, selecting China as the jurisdiction for potential disputes can increase the chances of favorable outcomes. Engage an English-speaking Chinese lawyer to assist in preparing a bilingual purchase agreement. Local lawyers possess practical knowledge, keeping them up to date with court procedures and changes. Their expertise ensures the contract’s enforceability and provides invaluable insights that overseas lawyers may overlook. By involving a Chinese lawyer, you strengthen your position and safeguard your interests (For more related information, you may check: How to prepare an enforceable contract while sourcing in China?).
3. Prioritize Quality Control Before Shipping
Despite taking precautionary measures, you must diligently undertake quality inspections to minimize the risk of disputes. More than one-third of trade conflicts arise due to quality issues. Instead of conducting inspections after the goods arrive at the destination, we recommend performing quality control checks before shipment. This approach allows you to address any concerns or discrepancies more efficiently, as solving issues before making payments is easier than doing so afterward. Whenever possible, conduct inspections during the manufacturing process and again before shipping, especially when the quality of raw materials significantly impacts the final product. By ensuring compliance with required standards before shipment, you avoid last-minute surprises and uphold product quality and functionality.
Sourcing in China offers tremendous opportunities, but success requires careful planning and execution. By adhering to these top three tips—conducting thorough due diligence, establishing an enforceable purchase contract, and prioritizing quality control before shipping—you can mitigate risks, enhance business relationships, and set the stage for a prosperous venture. Remember, acquiring local expertise and leveraging reliable resources are key to navigating the unique dynamics of China’s trade industry.
