Not only is it a good idea to have a local partner when doing business in China, in many cases, it’s necessary.  Legally, foreign entities cannot own companies in China, so depending on the scale of business that you’re looking to do, you’re going to need someone on the ground to help you do it.

Things to look for in a partner:

• Language skills.  A surprising number of Chinese students opt to learn English, but unless you are a fluent speaker of Mandarin or one of the local dialects, your partner needs to be your interface with the feet on the ground.  This means not only knowing English (or whatever your primary language of business is) fluently, but also being a strong and effective communicator in the local language.  This can be difficult to test for, but if you’re going to be doing important work with folks in China, you’re going to want to have one or more fluent Mandarin speakers on your end, so they can help assess your potential partner’s skills.
• Willingness to work odd hours.  There are very few natural crossover points in the workday between China and the US (more in Europe), so either you or your partner needs to be willing and able to work around the time difference, preferably both.  With Skype and other voice/video chat tools, it’s easy to connect with people halfway around the world, but much better if they’re willing to interrupt dinner and deal with a crisis, or jump on at 3AM local time when the server goes down.
• Willingness to travel.  One of the most important things about any relationship is spending time together.  In order to do this effectively with partners in China, your senior people (including you, most likely) will need to spend a lot of time in China – not a day or two, but weeks and months.  It also helps to have your Chinese partners come and live with you for a while, particularly at the start of a project, so that they are part of the process of defining needs, standards, etc.  In general, most of the people I worked with in China loved this and saw it as a great opportunity, but make sure you get on this early as visas to/from China still involve a fair amount of red tape.
• Empathy.  This may seem like a strange one, but what you need out of your partner in China is the ability to understand and effectively represent your needs.  Empathy is a key skill and not one that is commonly foregrounded in business.  A partner who empathizes with you will be a much more effective advocate for you in the long run.
• Experience working with foreigners.  This isn’t strictly necessary, but it’s definitely a benefit.  There are a lot of cultural differences between Chinese and American culture, from obvious things like the importance of hierarchy to subtle things like how critiques are communicated.  This is going to put a strain on both sides, but if your partner has been able to make this work before, the chances are better that they’re going to be able to make it work with you.  By the way, don’t fool yourself into thinking you’re going to be immune to cultural differences.  You will make mistakes.  Lots of them.  Without knowing it.
• Willingness to speak truth to power.  Again, this is a tough one to test for, but there are going to be things that you need to be told that are going to be uncomfortable to tell you.  Whether it’s personnel issues or scheduling changes, conflicts with national holidays or bureaucratic requirements, cost overruns or missed deliverables, something’s going to go wrong, and when it starts to go wrong is when you want to hear about it, not when it’s too late to do anything about it.  In Chinese culture, especially, it is traditionally looked upon as disrespectful and rude to disrupt those above you on the totem pole; younger Chinese can be more flexible about this, but you need to look for this trait and then positively reinforce it whenever possible.

This is hardly an exclusive list.  Working with China is a long and complex topic, certainly too much to cover in any one blog post, but hopefully this will help you get started.