Safer, Better Business in China

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China Trading Company or a Factory

Are you Dealing with a China Trading Company or a Factory?

by Matt Slater 30 September 2013

When you’re buying products from a Chinese company, a common issue is whether you’re dealing directly with a China trading company or with a factory.

This is because many such trading companies in China will be ‘unclear’ at best regarding the issue of who they actually are.

Despite their best attempts to disguise the truth, it is actually quite simple to find out if a factory is, in fact, a China trading company.

What’s the Difference Between a China Trading Company and a Factory?

It can be quite challenging to determine if your supplier is a China trading company or a manufacturer. Some will even blatantly pretend to be a manufacturer when they are not.

This has some implications when you’re trying to source from them:

  • It is much harder to assess the factory that will actually be manufacturing your product
  • It is harder to hold the trading company liable in the case of defective products
  • It may be easier for the trading company to ‘disappear’ or otherwise evade communication

These are rare scenarios, but as with all due diligence it is well worth making sure that nothing is amiss in order to reduce your exposure to risk.

So how can you determine whether you’re communicating with a China trading company or an actual Chinese manufacturer?

Viewing the Company’s Business License and Registration Records

As always, the first step is to ask for a copy of the company’s business license. This is always the starting point, and we make this point frequently here. The business license will tell you explicitly what kind of company you’re dealing with.

Once you’ve got a copy of the business license, you’ll need to look at the ‘Business Scope’ label (经营范围 – Jīngyíng Fànwéi).

The 'Business Scope' on the business license will tell you (in Chinese, of course) what category of company you’re dealing with by listing all of the products or services it is officially permitted to offer.

See China Checkup’s glossary of common business scope terms for some examples of the key business scope text you can identify from a Chinese business license.

What if you don’t want to let the company know that you’re researching them, though? Or, what if you don’t feel comfortable trusting the business license document they’ve shown you? In either case, the next step is to view the company’s registration record. Since 2006, these have been made available online to the general public by the AIC (Industrial and Commercial Administration Bureau, 工商行政管理局, Gōngshāng Xíngzhèng Guǎnlǐjú) for each province of China.

You need to identify which province the company is registered in, find the AIC website for that province, and then use the company’s registered Chinese name to search for their record. You can then use this public record to corroborate the information shown on the business license, or to check a company’s category (trading company or manufacturer) without them knowing.

Following this process will identify if they are indeed a China trading company. But note that this process must be done in Chinese, because Chinese is the only official language of mainland China.

 

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If you’d like a convenient, streamlined way to have this process completed for you, you might consider a China Checkup company verification report. We use our expertise and knowledge to research a Chinese company you’re interested in, including translating and explaining their public registration record, plus other information you’ll find useful in assessing them.

Further Reading




Matt Slater
Matt Slater

Author

Hi there, I'm Matt, the Founder & CEO of China Checkup. Originally from the UK, I am now based in Brisbane, Australia.

Frustrated by the scarcity of concise, high-quality and timely information about Chinese companies, I setup China Checkup whilst living in Shanghai in 2013.

My team are proud that China Checkup's company verification reports have now helped thousands of clients from all corners of the world to do business in China more safely.

  



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