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  • http://twitter.com/theeastasiaco East Asia Co.

    This blog post should be entitled “Effective Due Diligence when Investing in China” as it is really about significant capital investments in Chinese companies, big and small. But this is not the kind of due diligence that a small overseas consumer goods company is going to do when they want to give an order to a Chinese vendor. The due diligence that is involved there is visiting your prospective vendor, inspecting their facility, spending time with them and not just for a few days, doing a credit check on them with a reliable company ( there are some), getting references and somehow evaluating them ( there are ways ) and starting out with challenging sample orders and/or a small “pilot” order. In short, making sure as best you can that what you see is what you are going to get. Not easy.

    Many companies do not want to do due diligence because it is expensive, and they are as focused on short term profit/loss as their Chinese suppliers are. They would rather take the risk of being stuck with 2 containers of shoddy goods they cannot deliver to their customer than spend up front what it costs to do due diligence. I don’t think this is particularly wise but in these troubled times who can blame them.