Five Checks That Separate a Chinese Factory From a Trading Company

Roughly half of the companies presenting themselves as Chinese factories on sourcing platforms are trading companies. That is not automatically a problem — a good trader with a strong factory relationship can be a better partner than a mediocre plant — but it becomes a problem the moment you are paying factory prices for traded goods, or being told a specification can be met when the plant that would meet it has never been contacted.

These five checks are ordered by cost of skipping them.

1. The business licence, cross-checked

Every Chinese company has a unified social credit identifier — 18 characters, starting with a registration authority code. Ask for a photograph of the licence and check the identifier on the National Enterprise Credit Information Publicity System (gsxt.gov.cn).

Two fields matter more than the rest:

• Business scope (经营范围). Look for 生产 (production), 制造 (manufacturing) or 加工 (processing) against the relevant product. If the scope lists only 销售 (sales), 批发 (wholesale) or 进出口 (import/export), you are talking to a trader.
• Registered address vs operating address. A licence registered to a room in a business park is not disqualifying on its own — plenty of small factories have an office address on paper — but it should match something you can verify in step 3.

Also check the registration date. A company registered eight months ago presenting fifteen years of export experience is describing somebody else’s history.

2. Customs registration as an exporter

To export in its own name, a Chinese company must be registered with customs as a consignor/consignee (海关注册登记). Ask for the 10-character customs registration code.

This matters for reasons that show up later in the transaction:

• A registered exporter can issue its own export documentation and handle its own tax rebate.
• An unregistered “factory” must route the export through a trading company, which means a third party appears on your bill of lading and on the VAT invoice chain.
• If the goods fail inspection, the party you have a contract with may not be the party who shipped.

Many genuine small factories are unregistered and export through a partner. That is workable — but you should know it before you pay, not after.

3. A live video walkthrough, not a photo album

Photo albums are curated. Ask for a live video call, and specify what you want to see:

• The production floor, walked through in one continuous take, with the machine running.
• The raw material store — where the steel arrives in, where the powder is kept.
• The quality area: what instruments are there, and what is written in the last inspection record.
• The loading bay, ideally with something in it.

Three things are hard to fake in a live walkthrough: the number of machines actually running, the state of the material store, and whether anyone on the floor knows the part number you are discussing. Ask a worker to read a drawing number off the job card.

If the answer is always “the workshop is closed today” or the call is rescheduled twice, treat that as the answer.

4. Sample traceability

Send a specification, receive a sample, approve it. The failure mode is that the production run is not made to the sample you approved.

Mark the sample. Ask the factory to stamp the batch number onto the sample and the drawing. When the production order arrives, cut one piece and compare the fracture surface and the segment dimensions against the reference you kept. Better still: keep a sealed reference sample, dated, from the approved batch, and hold every future batch against it — this is the same method used for bond drift.

5. A first order small enough to lose

The cheapest inspection is a first order sized so that a failure is annoying rather than fatal. Order two cartons, not two containers. Pay for third-party inspection on that first order — not the factory’s own QC report, a separate inspector who has no relationship with the plant.

Pre-shipment inspection typically costs 100–300 per man-day. On a first order, that is the cheapest information you will ever buy.

Red flags, in the order they usually appear

What this does not prove

Passing all five checks tells you the company is real and the claim is plausible. It does not tell you the plant can hold tolerance on your specific part. That is what a first order plus inspection is for, and no amount of desk research replaces it.

Related reading

• Alibaba or a sourcing agent
• how to import diamond tools from China
• quality inspection service

Want us to run these five checks on a factory you are already talking to? Send the company name — we will tell you what the public record shows.