Investment Checklist: Evaluating Business Opportunities in China's Tier-1 Cities

Applicable Scenario: This checklist is designed for investors assessing potential business ventures, partnerships, or market entry strategies in China's Tier-1 cities (Beijing, Shanghai, Guangzhou, Shenzhen). It focuses on systematic due diligence to evaluate investment value, ROI potential, and risk exposure. Use this list prior to final commitment to ensure a comprehensive review.

Phase 1: Market & Regulatory Foundation

• Verify business scope alignment with the Negative List for Market Access — Confirm the industry is not restricted or prohibited for foreign investment.
• Assess local market demand and competition saturation — Analyze market reports, competitor density, and consumer trends for the specific city and sector.
• Review required licenses and permits (e.g., business license, industry-specific certifications) — List all mandatory approvals and confirm processing timelines.
• Validate compliance with data security and privacy laws (e.g., PIPL, CSL) — Ensure data handling plans meet cross-border transfer and storage regulations.
• Check intellectual property protection status — Confirm trademarks, patents, or copyrights are registered and enforceable in China.
• Understand tax obligations and incentives — Clarify corporate income tax, VAT, and potential preferential policies in free-trade zones or tech parks.

Phase 2: Financial & Operational Viability

• Project 3–5 year ROI with realistic revenue assumptions — Model best-case, base-case, and worst-case scenarios including currency fluctuation impact.
• Audit potential partner or target company finances (if applicable) — Review audited financial statements, debt levels, and cash flow history.
• Calculate operational cost structure — Itemize fixed costs (rent, utilities) and variable costs (labor, logistics) specific to Tier-1 city premiums.
• Evaluate supply chain and vendor stability — Map key suppliers, backup options, and assess geopolitical or trade policy risks.
• Confirm capital repatriation pathways and restrictions — Understand SAFE regulations for profit and dividend repatriation to avoid liquidity traps.
• Plan for talent acquisition and retention — Research local salary benchmarks, social insurance mandates, and competition for skilled labor.

Phase 3: Risk & Contingency Planning

• Identify political and regulatory change risks — Monitor policy shifts in your sector (e.g., tech crackdowns, sustainability mandates).
• Assess cybersecurity and operational resilience — Test IT infrastructure, backup systems, and response plans for data breaches or disruptions.
• Review force majeure and exit clauses in contracts — Ensure agreements include clear terms for dissolution, arbitration, and asset transfer.
• Analyze reputational and cultural alignment risks — Gauge brand perception, local consumer preferences, and potential PR pitfalls.
• Secure comprehensive insurance coverage — Obtain policies for property, liability, and political risk where available.
• Establish local legal and advisory network — Retain reputable legal, accounting, and consulting firms with on-ground expertise.

Phase 4: Final Pre-Execution Checks

• Re-validate all documentation with legal counsel — Ensure contracts, licenses, and incorporation papers are signed, notarized, and translated accurately.
• Confirm banking and payment infrastructure setup — Open local corporate accounts, test transaction processes, and set up forex services.
• Finalize physical or digital presence logistics — Secure office space/e-commerce platform, IT systems, and logistics partners.
• Conduct a final stakeholder alignment meeting — Align all investors, partners, and senior management on strategy, timelines, and KPIs.
• Document contingency triggers and response actions — Define clear thresholds for pivoting or exiting the investment.

Key Reminders

Critical Items: Pay utmost attention to regulatory compliance (Negative List, data laws), financial repatriation, ROI modeling under stress scenarios, and cybersecurity. These areas carry high impact and are common pitfalls for foreign investors.

Easily Overlooked Items: Local-level licensing variations within a city, hidden operational costs (e.g., compliance staffing, environmental fees), cultural nuances in business negotiations, and ongoing regulatory updates post-establishment. Schedule quarterly reviews to monitor these dynamic factors.

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