Written for global buyers. If you are sourcing from China, this is the single most expensive thing to get wrong.
You found a supplier. The price looks reasonable, communication is fast, and they say all the right things. But there is one question you may never have answered with certainty: are they actually a factory?
This matters more than most buyers realise. A trading company is not automatically bad — but they add margin, they control less of the production process, and when quality problems appear, they often cannot fix them at the source.
Here are the checks that separate a real manufacturer from a middleman, in the order you should run them.
1. Read the business licence scope (5 minutes, free)
Every Chinese company has a business licence (营业执照) with a registration code. The scope (经营范围) tells you what the company is legally allowed to do.
Look for terms like: 生产 (production), 制造 (manufacturing), 加工 (processing).
If the scope only contains 销售 (sales), 贸易 (trading) or 批发 (wholesale) — and no manufacturing terms — you are dealing with a trading company, regardless of what the salesperson says.
Verify the licence on China's National Enterprise Credit Information Publicity System rather than trusting an image file. You can also check registered capital, incorporation date, and whether the company has any abnormal-operation or penalty records.
2. Cross-check the social-insurance headcount
This is the check that catches most cases. Chinese companies must report the number of employees covered by social insurance (社保).
A supplier claiming 300 workers but reporting 12 insured employees is almost certainly a trader or a very small workshop, no matter what the photos show.
You are looking for consistency between the claimed scale and the reported headcount — not a specific number.
3. Ask for a live, unedited video walkthrough
Photos and pre-recorded videos are easy to obtain — and easy to borrow. Ask for a live video call while walking through the production floor.
Watch for: does the camera move continuously? Are machines actually running? Can they show the material store, the production line and the finished-goods warehouse in one continuous session?
A real factory can do this in five minutes. Reluctance, delays, or "our factory is under renovation" are answers in themselves.
4. Look at the width of their product range
Factories are usually narrow. They make a specific category — one type of valve, one class of packaging, one series of components.
Trading companies are wide. If the same supplier offers you valves, lighting, furniture and promotional gifts, they are selling, not manufacturing.
There are legitimate exceptions — some large manufacturers have broad product lines — but breadth is a prompt to dig deeper, not a red flag on its own.
5. Check who holds the certificates
When you request ISO 9001, CE, FDA or a product test report, look at whose name is on it.
If the certificate holder is a different company than your supplier, ask why. It is sometimes legitimate (a parent company or a factory in a different location), but it is frequently how a trader passes off a factory's certificate as their own.
Verify certificate numbers on the issuing body's portal — SGS, TÜV, BV and others all provide public verification.
6. Ask a question only a production team can answer
This is a simple, effective test. Ask something technical and specific:
- What is the maximum capacity of your largest machine, and how many shifts do you run?
- Where do you buy the raw material for this component, and what grade is it?
- What was the last defect type you found in final inspection, and what did you change?
A production person answers in specifics. A sales agent answers in generalities, deflects, or promises to "confirm with the engineering team."
7. Look at where they are located
Chinese manufacturing is clustered. Floor drains in Guangzhou, fasteners in Handan, glassware in Zibo, apparel in Hangzhou.
If your supplier's address is an office tower in a major city centre and they claim to manufacture, be sceptical. Factories sit in industrial zones — often on the outskirts, with the roads, logistics traffic and worker housing that come with them.
When a trading company is the right choice
Trading companies are not automatically wrong. They can be genuinely useful when:
- You need a small quantity across multiple categories (a factory will not consolidate for you)
- You need export documentation, consolidation and freight coordination handled
- You do not yet know the category and need someone to help you navigate it
The problem is not paying a trader. The problem is paying factory prices for a trader's service, or believing you have direct production control when you do not.
The 10-minute checklist
| Check | Factory signal | Trader signal |
|---|---|---|
| Business scope | Production / Manufacturing / Processing 生产 / 制造 / 加工 | Sales / Trading only 销售 / 贸易 |
| Insured headcount | Matches claimed scale | Far below claims |
| Video walkthrough | Live, continuous, machines running | Refused or delayed |
| Product range | Narrow and deep | Broad across categories |
| Certificate holder | Same company name | Different company, unexplained |
| Technical questions | Specific, immediate answers | Vague, deferred |
| Location | Industrial zone | City-centre office |
The bottom line
You cannot verify a supplier from a catalogue, a video, or a conversation alone. The checks above take about ten minutes of desk work — and they will tell you more than any number of assurances from a salesperson.
Verify the entity before you invest time in samples and negotiations. Getting this wrong is expensive; getting it right is cheap.
— Richard Wang · Rongyitong Global Business Bridge · China sourcing risk advisor for global buyers
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