Review & Due Diligence in China

Compliance, Transparency, Avoidance of being defrauded and clear communication are the key issues that every foreign company invested in China faces.

Compliance, Transparency, Avoidance of being defrauded and clear communication are the key issues that every foreign company invested in China faces. We provide all the necessary tools and mechanisms to the foreign investors abroad to maintain full control over their Chinese entity and obtain clear and transparent data and information regarding the business of their subsidiary.

The main tools we offer our clients to achieve transparency and control in China are as follows:

Company Review in China

A large number of foreign companies operating in China have reviews done by professional and licensed tax advisors. These reviews are generally done on a recurring basis, monthly, quarterly, bi-annually, or annually.

Why Do a Company Review in China?

The aim of this support is to have a team of professionals involved in the local accountants’ work, act as a support function for questions and help the management controllers of the headquarter in clarifying sensitive and complex issues and create transparency. The added value here is to have ongoing compliance and clarity in local finances and taxation rather than only relying on the annual statutory audit at the end of the fiscal year which oftentimes is executed by local audit firms with little understanding of international reporting- and compliance requirements.

Focus areas of a Company Review

Focus areas for review services are industry-specific, depend on the requirements of the headquarter abroad and can be jointly defined and specified. In our review function, MSA supports in reviewing the subsidiaries´ recurring accounting, tax declarations and tax issues, payroll, import and export procedures, intercompany transactions, outgoing bank transactions etc. The main goal is to strengthen compliance and increase transparency and efficiency.

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China Due Diligence

Fraud in China can take many forms and can occur in any type of business transaction, perpetrators can be internal- or external actors, commercial companies, or 3rd party agents. Preparation and prevention are the key to success for foreign companies engaging in doing business in China. Proper due diligence allows investors to understand the nature of the transaction or deal, the all the risks involved, and whether the deal is suitable for the company. Proper preparation and prevention are the key to success for foreign companies engaging in doing business in China

Foreign entities rely on professional financial advisors to navigate the large numbers of databases, often not accessible to the general public and where information is available exclusively in Chinese.

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When Should Foreign Business in China Carry Out Due Diligence?

Financial Due Diligence

  • Entering into a Joint Venture
  • Investing through merger or acquisition
  • Investing into start-ups

Operational Due Diligence

  • Cooperating on manufacturing with a Chinese partner, for producing goods or parts
  • Cooperating on distribution with a Chinese partner of products or parts
  • Licensing trademarks to a Chinese partner

Reference checks and 3rd party legitimization of:

  • Key personnel
  • Suppliers
  • Key clients
  • Licensees
  • Competitors

On-Site visits and inspections

Corporate Social Credit System

As the Chinese Corporate Social Credit System will make the enforcement of laws and regulations stricter and more systematic, it is important for companies to be fully up to date about how the social credit rating can impact your business.

Even though the requirements which companies must meet are well-defined in existing and new regulations, a challenge arises because there is currently no centralized database which provides a clear overview of these requirements. This means that knowing all requirements relevant for your company can be a time consuming and costly task. As a leading tax and financial advisory company in China, we specialize in helping Foreign Invested Enterprises be compliant with Chinese laws and regulations.

Our China Corporate Social Credit Services include:

  • Company Public Credit Profile Review – Because a company’s social credit rating will be affected by the rating of business partners, we would as well examine the social credit rating of your business partners, suppliers, clients etc. to identify potential threats you’re the credit rating of your Chinese subsidiary.
  • Company Financial Review – We are specialized to conduct a review of a Chinese subsidiary’s accounting and internal financial processes to identify potential hazards and compliance issues which directly affect your social credit score
  • Credit Restoration Services – Upon discovery of low social credit scores or blacklisting, our team helps to rectify outstanding compliance issues and supports to apply for credit restoration with relevant authorities.​

To learn more about our services or understand more about how it works, get in touch with us right away and we can give you all the information you need.