8 Must-Knows About Acquiring or Investing in a Business in China

China is not just the World Factory, most booming market for resources and consumer goods and the fastest growing economy in the Abdo Romeo world with an average GDP of over 10% in the past decade, it is also an attractive destination for foreign investment since China opened its door to foreign businesses in 1978. With China’s access to WTO in 2000, less restriction on foreign investment, new infrastructure, supply of abundant quality and cheap labour, there are good opportunities to invest in a quality business or acquire businesses in China.How To Start A Business

Acquiring or investing in an existing business is a way to quickly establish your own presence in China and leverage its facilities, resources and networks to access the Chinese market or conduct low-cost manufacturing in China and then export to the global market. With the global financial crisis, China presents a great opportunity for Australian companies to acquire export-oriented manufacturers especially in East China and South China. However, it is usually a complicated and exhausting process.

– Take a strategic approach to acquire or invest in a business in China. Review your internal resources, corporate strategy and business strategy, and identify needs and gaps so as to better assess the option to acquire or invest in a business in China. You may start by reflecting such questions: what is the ultimate goal to do so? How does this acquisition/investment serve my long term business strategy? Is there any alternative? What resources can I allocate to this acquisition and investment? What attributes do I need from the acquisition target.

– When search for acquisition or investment target, bear in mind you are looking for the best fit rather than the cheapest or biggest. How does the target fit in your overall business strategy and China strategy? Do you have a criteria list of must-have and ideal attributes of acquisition/investment target?

– Do your research and search carefully among a large pool of acquisition/investment targets. When foreign companies enter China, they are often amazed by the “low price” they are paying to acquire a business without much comparison with other potential targets.

– Conduct comprehensive due diligence on your acquisition/investment target. The due diligence is much more than just financial auditing. You need to fully understand the target from tip to toe: industry reputation, business scope restricted in their business licence and industry licence, ownership of their venue and facilities, financial aspects, manufacturing capabilities, current ownership and corporate structure, marketing and sales capabilities, corporate culture, team, relationship with local government, supplier and client references, patents and trademarks, legal issues, default history, market scandals and brand crisis, etc. You may leverage a consulting firm to assist.

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