Due Diligence
24
June 2014

Is This China Company Legit?

It is likely that you found this article because you have a nagging question about a potential business opportunity or partnership - “is this China company legit?”.

When dealing with any Chinese company for the first time, it is always wise to have in place at least a basic procedure for due diligence.

This article introduces some simple techniques you can follow to help you determine that a China company is legitimate.

Key Point: Ask for the Business License

This is a basic, easy hurdle to put in front of the China company and if they refuse to provide you with a copy simply walk away.

Here is an example of what the China business license looks like:

However, as business licences are often faked (we’ve seen quite a range of fakes, from outrageously obvious ones to more subtle alterations), you need to make further checks to make sure it is a legit China company.

Check the license against what’s on record with the relevant authorities. We can assist you with this process, but it is also possible to do the checking yourself.

It is actually possible to do this without asking for the business license first, if you know the company’s official name in Chinese. This may be useful if you wish to check a China company is legit before you even make contact with them. 

Another option is of course to order our China Company Verification report.

Carefully Examine Registration Information

First thing to consider is was the registration certificate genuine and up-to-date? If you have been given a fake or altered certificate, this is not a legit company!

With this registration information now to hand, compare some of the key details of the license — date of formation, location and business scope — with what the company claims on its website and elsewhere.

If the company claims to have been operating since 2003, but their business license states they were recently registered alarm bells should be ringing.

Business scope is another good indicator - in China a company's activities should be covered under their business scope, so if the company claims to be manufacturers of furniture the business scope should include both "manufacturing/production" and "furniture".

More advice on how to find and assess China manufacturers can be found here.

When verifying with China Checkup, this is part of our routine to make sure you are dealing with a legit China company.

Note on Registered Capital

In the past a China company's registered capital was a good indicator of the size of their business, but over time this has become increasingly irrelevant.

These days registered capital may not be what it seems to be. We previously wrote about how it’s relatively easy for Chinese companies to fake their registered capital.

This is often done with that exact purpose in mind – to mislead people using the registered capital to assess the size of the company and the scale of its operations.

Further, the China company registration system was changed in March 2014. One of the biggest changes was that there are no longer any restrictions on the amount of capital to register for new Chinese companies:


除法律、法规另有规定外,取消公司注册资本最低限额,不再限制公司设立时股东(发起人)的首次出资比例和缴足出资的期限。
Apart from legal, legislative and other provisions, the lower limit for the amount of capital registration is to be abolished, the ratio of capital payment by shareholders or founders for the establishment of a company will no longer be restricted, and the payment of capital will no longer have a time limit.

Now the amount to register is up to the company itself, and the paid-up capital is no longer shown on business licenses.

How to Determine "Is This China Company Legit"?

To summarize, when asking the question "is this China company legit?", we advise that obtaining and verifying a China company’s business registration is essential.

Examine the company's registration details to make sure they align with how they present themselves and your expectations, whilst being aware that their registered capital may not be quite what it seems.

China Checkup’s verification services make the process of verifying a Chinese company straightforward and pain-free. Our services can be conveniently ordered online, have guaranteed delivery times and our English-language PDF reports are sent direct to your email inbox.

If you are wondering “is this China company legit?”, then start your report today.

Further reading