Is Your Chinese Supplier a Factory or a Trading Company? How to Check the Public Records

The video call went well. The sales manager walked the camera along a production line. The manager stopped at a machine with the right kind of parts coming off it and said, "This is our factory." It may well have been. It may also have been a partner's factory that the trading company uses for this product line.

Buying through a trading company is common and often sensible. Traders add real value. They combine goods from several factories, check quality, have English-speaking staff and offer easier payment terms. The risk comes from thinking you deal with the manufacturer when you deal with a trader. Then your contract, your tooling, your NNN (non-disclosure, non-use and non-circumvention agreement) and your enforcement plan are all aimed at the wrong company. My supplier checks show whether the company you deal with is the factory or a trader.

What the public record can tell you

Business scope. A Chinese company's business scope is the registered list of what it may do. For a manufacturer, it normally includes production or manufacturing of the relevant goods. If the scope lists only sales, import and export, or technology services, the company is probably not making anything. Scope shows what a company is permitted to do. It doesn't prove the company does it. So treat it as one signal.

Registered address. Look at where the company is registered. An office tower address in a city centre is typical for a trader. An industrial park or a rural town address is more typical of a factory. Then compare it with the address you were shown on the call or during a visit.

Annual report headcount. Chinese companies file an annual report each year on the national publicity system. It may show the number of employees. But companies can choose whether to make that figure public. A company may claim a large production operation but declare a very small headcount. That deserves a follow-up question.

Permits and filings that come with production. Many manufacturing activities need licences or filings that anyone can search. Examples are pollutant discharge permits, industrial product production licences for regulated goods, and food production licences. If the product would need one and the company doesn't hold it, the goods are probably made elsewhere.

Patents and designs. A manufacturer that develops its own products often holds utility model or design patents in its own name. (A utility model is a simpler, faster kind of Chinese patent.) If there are none, that proves nothing. If there are some for the relevant product, that is a useful sign.

Related companies. The registry shows shareholders and senior managers. A trading company and a factory owned by the same family or group will often share names in those records. That can explain why the factory floor on the call belonged to a different company.

Questions to ask the supplier

Records work best together with direct answers. Ask the supplier:

• Which company owns the production line where our goods will be made? What is its Chinese name?
• Will that company sign the contract and issue the invoice? If not, why not?
• Who will own the molds and tooling, and where will they be kept?
• Will any part of the work be subcontracted?

Compare the answers with the registry. If they match, that's reassuring. If they contradict it, sort that out before you sign.

Why it matters

Contract. If the factory is a separate company, the trader can't bind it. Your quality and delivery terms are only as good as the trader's ability to enforce them against its own supplier.

Confidentiality and tooling. An NNN signed by the trader does not bind the factory. Your drawings or molds may sit at the factory. If so, you may want the factory to sign too. At least ask it to confirm your ownership in writing.

Recovery. If something goes wrong, you can only sue the company you contracted with. A trader with few assets may be harder to recover from than the factory behind it.

When to go further

The order may be large, the product may be custom, or your designs may be sensitive. Then a public-record check is the start. The next step is a check of the factory company itself. Often that also means a visit, with a clear list of what to verify on site.

Part of my guide to checking a Chinese supplier.

Are you about to pay a Chinese supplier you haven't worked with before? Send me its name and an outline of the order. Ask about a supplier check →