Foreign buyers increasingly order a company search before paying a Chinese counterparty — good. But most then read the report like a credit score: green means go. A China due diligence report is closer to an X-ray. It shows structure, not health, and each field needs interpretation.
The business licence (营业执照): the anchor document
Everything starts with the registration record behind the business licence, pulled from the National Enterprise Credit Information Publicity System. Five fields matter most:
- Registered Chinese name. This is the only legal identity. The English name on the website, the email signature and the proforma invoice has no legal status. Your contract — and your wire transfer — must match the Chinese name character for character.
- Unified Social Credit Code. An 18-digit identifier. Use it to cross-check litigation, enforcement and tax records; similar-sounding company names are a classic fraud vector.
- Legal representative. The individual with statutory power to bind the company. Search this person separately: serial legal representatives across dissolved companies, or a name on the dishonest-debtor list, are serious warnings.
- Business scope. If "manufacturing" is absent, you are probably dealing with a trading company, whatever the factory tour suggested.
- Status. You want 存续 (active). "Revoked" (吊销) means the licence was cancelled for violations but the company was never liquidated — do not contract with it.
Registered capital: subscribed is not paid
Registered capital is routinely misread. Since 2014 China moved to a subscription system: a company can register RMB 50 million of capital with little actually paid in. The 2024 amendment to the Company Law now requires subscribed capital to be paid up within five years, but for existing companies transition periods apply. Read two lines together: subscribed capital (认缴) and paid-up capital (实缴). A supplier asking for a USD 200,000 deposit while showing RMB 1 million subscribed and zero paid-up is asking you to be its working capital. Note also that shareholders are liable up to unpaid subscribed amounts — relevant if you later sue and the company is empty.
The operating-anomaly list (经营异常名录)
This is the most underused field. Market regulators add companies to the anomaly list mainly for two reasons:
- Unreachable at the registered address. Often benign (an office move never filed), often not (a shell that exists only on paper).
- Failure to file the annual report. A functioning business with an accountant files on time. Missing filings suggest dormancy or distress.
Three years on the anomaly list moves a company to the serious-violations list, with real consequences for bidding and banking. Either listing means: pause, ask questions, get documents.
What the report will not tell you
- Financials. Private Chinese companies do not publish accounts. Headcount proxies help: social insurance contribution numbers in the annual report give a floor on real employee count — a "300-worker factory" insuring 9 people is a trading desk.
- Beneficial owners behind nominees. Shareholding chains can end in individuals holding for someone else.
- Operational reality. Only a site visit, ideally unannounced, tests whether machines run.
Reading it like a lawyer
Cross-reference at least four sources before money moves: the registration record, court judgment databases, the enforcement-defaulter list, and equity-pledge or chattel-mortgage filings (a supplier whose equity is fully pledged to a lender is one bad quarter from your deposit becoming unsecured credit). Then make the report operational: the verified Chinese name goes into the contract, the company chop on signing must match that name, and the beneficiary bank account must be the company's own corporate account. A due diligence report that never changes the contract was a receipt, not protection.