How to Tell If Your Supplier Is a Factory or a Trading Company

Ask a supplier whether they are the manufacturer. Almost every one of them will say yes. It costs nothing to say.

The answer that matters is in their paperwork, not their pitch.

The short answer

Check the business licence. Every registered Chinese company has one, and it lists a registered business scope. If that scope does not include production or manufacturing, the company does not make anything. It buys from someone who does.

You can verify the licence yourself against China's national registry, free, in about ten minutes. Everything else on this page is a cross-check on that one document.

What is the difference between a factory and a trading company?

A factory owns production. Machines, floor space, workers, a quality system, and the ability to change something on the line when you ask.

A trading company owns the relationship. It buys from factories and sells to you. Some are excellent. They carry the communication, the paperwork, the consolidation and the chasing, and they take a margin for it. That margin is usually somewhere between 5 and 30 per cent of the goods value, and you almost never get to see it.

There is a third type nobody warns you about. A factory that also trades. It makes two of the five products it quoted you and subcontracts the other three. This is the most common version and the most expensive to find out late, because you assume one standard of control and get another.

Why does it matter who you are actually buying from?

• Price. You are paying a margin you cannot see and cannot negotiate against, because you cannot see the cost it sits on top of. Asking for a cost breakdown only works when the person you ask has one.
• Technical change. When a sample comes back wrong, a factory can walk to the line. A trader has to send an email and wait, and your correction gets translated twice.
• MOQ. Traders can often go lower than a factory, because they combine your order with others. That is a genuine advantage. It is also why a surprisingly low MOQ on a technical product is a signal worth checking.
• Accountability. When a shipment fails, you need to know who holds the defect and who holds the tooling. One party in the middle makes both harder.
• Tooling. If you pay for a mould and your supplier does not own the factory it sits in, your claim on it is weaker than you think.

How do you check a Chinese supplier's business licence?

Ask for a copy of the 营业执照, the business licence. Any legitimate company will send it. Hesitation here is the answer on its own.

Then read these fields:

• 统一社会信用代码. The unified social credit code, 18 characters. This is the company's unique identifier and the thing you search by.
• 名称. The legal company name, usually in Chinese. It needs to match your contract and the bank account you pay. A mismatch here is the most common invoice fraud in this industry.
• 经营范围. The business scope. This is the field that answers the question. Look for 生产 (production) or 制造 (manufacturing). A scope built on 贸易 (trade), 销售 (sales) and 进出口 (import and export) with no production wording is a trading company.
• 类型. Entity type.
• 注册资本. Registered capital. Not cash in the bank, but a company making your product with a registered capital of 50,000 RMB is worth a second look.
• 成立日期 and 住所. Establishment date and registered address. Compare the address to the factory address they gave you. They are often different, and sometimes that difference is the whole story.

Now verify it. Search the 18-character code on the National Enterprise Credit Information Publicity System at gsxt.gov.cn. It is the official government registry. The site is in Chinese and uses a captcha, so use a browser translation. If the registry shows a different name, scope or status than the document you were sent, stop there.

One nuance that catches people out. Plenty of genuine small factories do not hold their own foreign trade operator registration, so they export through an agent. That means the shipper on your bill of lading, or the name on your invoice, may not be the factory. A third-party name in the paperwork is not proof you are dealing with a trader. Ask who it is and why, and check that name too.

What about the verified badges on Alibaba?

Worth less than they look. The Verified Supplier programme is a paid membership, roughly US$12,500 a year for Chinese suppliers, which funds an on-site audit by a third party such as SGS, TÜV Rheinland, Intertek or Bureau Veritas. That audit checks the licence, ownership, facilities, equipment, headcount and basic quality systems.

Here is what it does not do. It does not test a single product. It is a snapshot taken at application or renewal, not an ongoing check. And trading companies can hold the badge, so it does not tell you who makes your goods. Gold Supplier is a lower tier with no on-site audit at all.

The useful part is the assessment report published on the profile. Open it and compare the audited address against the address on the licence and the address they told you. Also check the supplier sub-type. Custom Manufacturer means something. Multispecialty Supplier usually means trade. If the platform itself is where you are stuck, there are better places to find real manufacturers.

What questions catch a trading company out?

Ask these in one message, plainly, early, before you have invested anything:

1. What is the registered name and address on your business licence, and is the factory at that address?
2. Which of the products in your catalogue do you make yourself, and which do you buy in?
3. How many production lines run this product, and how many workers are on it?
4. What is the cycle time per unit and your monthly capacity on this line?
5. Who owns the moulds for this product today?
6. Can you video call me from the line while it is running?
7. Which certifications are held in your own company name, and can you send the certificate numbers?

A factory answers four, five and six without pausing. Capacity and cycle time are the numbers a production manager lives in. A trader goes vague, promises to confirm, or sends a glossy capability deck instead of a number. The live video call is the single best test. A scheduled, edited factory tour video is not the same thing and is often not their factory.

How do you tell at a trade fair?

At the Canton Fair you can read it off the booth, and this matters now. Phase 2 runs 23 to 27 October 2026 and Phase 3 runs 31 October to 4 November.

• Range. A booth covering six unrelated categories is trade. Factories go deep in one.
• Staffing. Factories bring a technical person. Ask something about tolerance or material grade and watch who answers.
• Samples. Factory booths carry work in progress, rejects and material swatches. Trade booths carry finished goods only.
• The card. Compare the company name on the card to the name above the booth and the name on the licence. Three names means questions.
• Location. Factories can usually name their city and the road. Vagueness about where production sits is a signal.

Our guide for first-time buyers covers how to work the halls.

When is a trading company the right choice?

Often, actually. We use good traders deliberately.

• Your order is below what a real factory will run, and you would rather pay a margin than sit on stock.
• Your product is a set of parts from different factories and someone has to consolidate it.
• The factory that makes your product well speaks no English and has no export capability.
• You are testing a product and do not want to commit to tooling yet.

A trading company is a problem when it is a secret. The cost is fine. The deception is not. If a supplier tells you they own a factory and they do not, that is the thing to act on, not the margin.

If you are paying trader pricing and your margin will not carry it, that is a pricing decision before it is a sourcing one. Kristy covers the maths on how to price a product so wholesale does not kill you. Then come back and run the landed cost both ways.

The check before you pay a deposit

1. Business licence received, read, and the scope includes production.
2. Licence verified against gsxt.gov.cn by the 18-character code.
3. Registered address compared to the stated factory address.
4. Live video call from the running line, unscheduled.
5. Capacity and cycle time given as numbers, not adjectives.
6. Mould ownership agreed in writing before tooling is paid.
7. Bank account name matches the licensed company name exactly.
8. Certifications checked by number, in the supplier's own name.

None of this takes long. It is a morning's work against an order you will live with for a year. The rest of the deposit-stage checks are in how to vet a factory before you pay a deposit.

If you would rather someone did this for you, including the licence checks and the factory visits, book a call.