7 Ways to Verify Chinese Suppliers Are Factories, Not Trading Companies


Many importers are dying to know whether they are dealing with a factory or trading company when importing certain products from China. Because almost every Chinese supplier claims that they are factories, including suppliers on Alibaba, though they are actually trading companies. So there are lots of blogs and articles that teach importers how to verify your suppliers on Internet, but most solutions they suggested didn’t make any sense in reality.

In this article, I’ll first explain why solutions that lots people suggested doesn’t work , then offer 7 correct ways to find out what your supplier really are.


Part I:  2 Ways Often Suggested, But Don’t Work at All

1. Check Supplier’s Registered Capital

Some blogs mentioned of checking supplier’s registered capital to verify whether it is a factory. If with large registered capital, then it’s factory, otherwise, it’s trading company. But this is totally wrong. If your supplier is a small-scale factory, its registered capital will be likely less than trading company’s. And the registered capital of large-scale trading company can be very large, like more than 10 million CNY.

No matter you register a company or a factory in China, your registered capital is usually more than CNY 500,000. But it doesn’t mean you must have ¥500,000 in your hand at that time. It means during the next 10 year, the amount in your company’s account can be over 500,000 in any day, and it’s legal.

Another thing is you can easily borrow ¥500,000 to deposit in your company’s account for one day, then transfer it out next day. It only takes hundreds US dollars to get this one day loan as there are many companies can offer this service.

2. Ask for Samples, Check the Address Where It Was from.

Some others recommend the importers to ask for samples before placing the order to the suppliers. Then you can check the product’s quality, and get supplier’s office address. If the office address is the same place as the registered address on the business license, the supplier will be factory; otherwise, it’s a trading company.

But this method is not applicable in China, or even many other countries, because it’s quite normal that a factory’s office address is not the same as registered address. Many middle and small scale factories’ workshops are rented, so they may change to rent another place after 2 or 3 years, but they won’t update the registered address at that time. And some factories’ workshop and office are divided into different places, even different cities.


Part II: 7 Ways to Verify Whether Your Supplier Is a Factory

1. Check the Business License

The most important part is “Business Scope” (经营范围) when checking supplier’s business license. This is the easiest and most direct way which your supplier cannot counterfeit. A factory’s business scope must include words like “manufacture or produce” (生产,加工,制造), which a trading company’s business scope won’t have.

Send supplier’s business license to a reliable friend who knows Chinese well for a check, or you can go to Elance to find a freelancer for translation, which only costs several dollars.

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Business scope

Business Scope is the most important part when check supplier’s business license

2. Check the Value Added Tax (VAT) Invoice 

This is the best way to verify suppliers. Chinese government offer drawback for many kinds of exporting products in order to encourage export. But if a company want to get export drawback, 17% VAT invoice is must needed which can only be issued by a factory.

So there is the way: tell the supplier that you have a partner in China who can help you apply for export drawback, so ask for issuing a 17% VAT invoice. If the supplier refuse or hesitate to reply you, they probably are trading company, or a very small-scale factory.

But if they agree to issue the VAT invoice, you can ask for a clear picture of the invoice made before, and check carefully the company name on it. If it is the same name on supplier’s business license, then it must be a factory.

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VAT Invoice

A sample of VAT Invoice

3. Check Supplier’s MOQ

Factory’s MOQ is normally higher than trading company’s, and it’s almost the common sense in trading. So that you can verify your suppliers by testing if they can sell you less quantity products.

For example, you are finding a supplier for purchasing 5,000 mugs, you can tell supplier that you are buying only 300 pieces for a try, and will place big order in the future if the quality is good. They will say no if you are dealing with a factory as their MOQ won’t be less than 1,000 pieces. But a trading company may accept your 300 pieces order.

4. Check the Products Catalogue

A factory usually is specialized in one or several kinds of products, if there are lots kinds of products in your supplier’s catalogue, then it’s more likely to be a trading company.

I know a stainless steel vacuum cup factory (200 workers, around 70Km away from my office) who is among the TOP 10 in Chinese vacuum cup industry. Except for vacuum cup, they also sell glass made cups, but these are supplied by other smaller factories. This company’s glass made cups price is even higher than other trading company quoted.

But if your cup suppliers supply stainless steel vacuum, glass, plastic cup, and mug, etc. they are not factories.

5. Check the Factory Auditing Reports

If supplier told you that they has supplied products for world companies like Walmart, then you can require them to send you the factory auditing report.

If they refuse or hesitate, then they probably are trading companies. If they send you the factory auditing report, you need to check the company name on the report. If it’s the same name as the one on Business License, then must be a factory.

6. Check the ISO 9001 Certification

Not every factory has ISO 9001 Certification, but most companies who has this certification are factories, because trading company has no need to have it.

But still some trading companies get this certification, and all of them are only specialized in one product category, and have solid relationship with their factories. I know several this type trading companies, and I have to say working with them will be no much difference from working with factories, even on price.

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ISO 9001 certification

ISO 9001 Certification

7. Check Where Supplier Is Located in China

All products have their own industrial areas in China, and let’s take RC (Remote Control) toy cars as an example. I wrote in another article about how to import toys from China, and mentioned all RC toys are mostly produced in Chenghai City, Guangdong Province

Because this city has the complete supply chain for all parts of RC toy cars , such as motor, remote controller, and wheels. The factory only need to design a car’s shell and packaging, then assemble all parts together. Producing RC toys in any other cities will be more complicated and higher cost than in Chenghai, so factories will be not likely located in other places.

If your suppliers is not located in Chenghai, like in Guangzhou or Shenzhen, they are probably trading companies. Maybe there will be some high tech RC toys factories located in Shenzhen, but very few.[/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]



  1. Mr Hyginus Obiekii December 24, 2015 at 1:40 am - Reply

    Dear i am Mr Hyginus Obiekii, MD: O. HASCONOBIS INT`L LTD,
    I am a buyer of china products, but now the rate of of my country economic down is very high that we buy $1usd at #158 naira before, but now it is $1usd now #287, which make importation from china very difficult,
    (1) Our Government have ban sending money out of Nigeria to other country.
    (2) the usa dolar is highly scarce in my country thats why it is going up every day.
    (3) the goods we buy with the dolars is not going up here because there is economic hardship in all citizen
    (4) i am sourcing for a means where by i can export any items from Nigeria to china and use the proceed and import goods from china, please advice me on this, you can get me on mobile +2348033305849
    Hyginus Obiekii

    • Zhu Jing December 24, 2015 at 10:14 am - Reply

      Hi, Hyginus.
      I got few ideas for problems you are facing now.

      (1) Although Government banned sending money abroad, but you can still send money to China via some personal underground banks. There are huge numbers Chinese doing business in Nigeria, and they need local money too. And there must be existing lots companies help sending money from China to Nigeria, and Nigeria to China. So you can go to ask some Chinese who living in your country, and they will introduce someone to do the transfer. This method works everywhere in the world.

      (2) The USD rate to Chinese Yuan is also going up since beginning of 2016, but it’s around 5%, but much less than USD to Naira. However if you are buying the same price as half years ago from suppliers in China, you can ask them to reduce price because of the changed rate of USD to CNY.

      (3) As goods price didn’t change and the bad economy in Nigeria, maybe you can change some daily necessary products or low value products.

      Some daily necessary, which must be made in China, will be a good Choice, because people can not live without them. And some low value products make sense too. Example: Ukraine has very bad currency rate to USD and also bad economy at beginning of 2015. An Ukrainian client stopped his crocodile leather handbag business, and want to import loom bands from China, because it’s cheap. Parents buy a small bag of $0.1 (maybe more), and kids can play for quite awhile, but he import from China at price around $0.03. I help him buy around two containers until he quite the business half year later, because too much competitors for this in his country.

      (4) Export products from Nigeria to China will be not that easy. Because I found most items China are importing is minerals and other bulk commodity, which is not easy to involve.

      Hope this help you. My colleague will contact you later.

  2. Casano January 5, 2016 at 2:31 pm - Reply

    Really useful infomation, thanks for sharing

    • Zhu Jing January 7, 2016 at 10:21 am - Reply

      Thanks for liking this Casano, we’ll keep posting useful articles.

  3. Destiny March 17, 2016 at 5:26 pm - Reply

    what about the manufacture said they have factory in XXX n showroom in different place, or they are manufacture and trading co, both?


    • Isabelle Hai April 8, 2016 at 4:58 pm - Reply

      Hi Destiny, it’s Isabelle from Jingsourcing.com. The supplier you mentioned should be trading companies, the factories they said are actually there cooperated factories.

  4. Francis August 4, 2016 at 5:05 am - Reply

    Hi Jingsource,

    Will it be better to go to china directly and find manufacturers or is there a particular service where i can purchase so they do the verification for me?

    • Isabelle Hai August 9, 2016 at 3:28 pm - Reply

      If you do not know well about the city in China where your supplier located, you cannot find real manufaturers, neither. And sometimes the price from big factories are not better than a trading company. Also, what kind of verification would you like to do?

  5. Prashant Raval October 18, 2016 at 5:37 am - Reply

    Dear sir
    I want to import NMRV wormreduction gearbox from china.and I dnt know the procedure for it. Can you please help me to find authentic manufacturers and exporters?

    • Isabelle Hai October 18, 2016 at 11:14 am - Reply

      Hi Prashant, please send email to [email protected] with detailed information about the products you need, thanks.

  6. George Permaton October 27, 2016 at 1:28 am - Reply

    Hello, guys, if you’re worried about sending your money to unknown company in China, I would recommend you using supplier verification services. It’s pretty cheap, I personally use – http://www.SpyMySupplier.com . They mostly give you report back in couple hours.

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