Do not forget due diligence when doing business in China

'When you move into China don't leave your brains behind,' warns David Holloway, Chief Operating Officer of International Risk, which was a management buy-out from PricewaterhouseCoopers in October 2002, and specializes in regional business risk investigations.

'It is easy for business partners to appear bigger than they really are and for potential rewards to be exaggerated,' says this former Hong Kong Police official. 'You can't just rely on introductions and middle men, there is a process of due diligence.'

Firms like International Risk have the contacts to check out mainland Chinese business partners. Despite it's meteoric economic development, China is still coming to grips with international business practices.

'How many sets of books does your partner have?' asks Mr. Holloway. 'It's still rare to find accounts and audited numbers in line with international standards.'

International Risk works on behalf of many blue-chip firms in mainland China, and has an enviable network of contacts to tap for information, and surprisingly quite a lot seems to be available to those who know who and what to ask.

'Things are starting to improve,' admits Mr. Holloway. 'The movement from state-ownership to privatization is improving transparency, and the Chinese system is developing fast. I have seen more changes in the past five years than in the previous 20.'

All the same Mr. Holloway's sage advice to newcomers is simply to work with a Hong Kong business partner to access China.

'Then you have recourse to a British common law system, and the transparency of Hong Kong accountancy. Plus Hong Kong is a safe place for staff to live, it is a low tax location and the government system is simple, largely free of corruption and it is easy to get things done.'