"Are you a factory or a trading company?" is the first question most buyers ask a Chinese supplier, and almost every supplier answers "factory". The answer you get by asking is worth very little. The answer you get by checking is worth a lot, because it changes the price you should accept, who controls quality and delivery, and who you can hold responsible when something goes wrong.
This guide explains why the difference matters, the evidence that tells them apart, and how to work safely with a trading company when that is the right choice.
Why the difference matters
A trading company is not a scam. Good traders find suppliers, manage quality, consolidate orders and handle export paperwork, and many buyers are better off with one. The problems come when a trader presents itself as a factory:
Price. You pay a margin you do not know about, and cannot compare with the maker's price.
Control. The trader cannot change a production schedule or a material it does not control. Promises about lead time and specifications are only as good as its relationship with the real factory.
Responsibility. When goods are wrong, the trader and the factory can blame each other, and the factory has no contract with you.
Continuity. The trader can switch factories between orders without telling you, so the second order is not made where the first one was.
Evidence from the official records
The registration data gives you the first, and most objective, evidence. See how to read and check a Chinese business license for the details.
Business scope. Manufacturing words (生产, 制造, 加工) suggest production. Only sales words (销售, 批发, 进出口) mean the company is legally a trader.
Insured headcount. A manufacturer needs workers. A company with a handful of insured staff is unlikely to run a production line, whatever its website shows.
Address. An office tower or a commercial building suggests a trader. An industrial park or a town known for the product suggests production.
Related companies. Some groups use an export company and a production company with the same owners. That is common and can be fine. Check that the production company exists and that it is the one shown on video.
Certificates. Product certificates and test reports name a manufacturer. If that name is a different company, ask who it is.
Evidence from a live video walk-through
A live video call, where you decide where the camera goes, is the second piece of evidence. A pre-recorded factory video proves nothing, because anyone can film anyone's factory.
Ask to start at the gate or the building sign, then walk to production without cuts.
Ask to see your type of product being made now, not finished goods in a showroom.
Ask to see raw material stock and the main machines for your product, and ask what each machine does.
Ask workers or the line supervisor a simple question about the product. People who make it every day answer easily.
Ask to see the office or production planning board. Real factories have production schedules for many customers.
If the call shows an empty hall, a warehouse, or a factory where nobody can explain what is being made, you probably have a trader, or a trader borrowing someone else's factory for the call.
Evidence from the documents they send
The proforma invoice, the contract, the license and the bank account should all be in the same company's name.
Product drawings and test reports from a real maker are specific and consistent. A trader's documents often come from several different companies.
A factory can tell you its monthly capacity for your product and which machines limit it. A trader usually gives round numbers.
When a trading company is the right choice
Use a trader when your order is small, mixed, or spread over many product types, when you need someone to consolidate goods from several makers, or when the factories you need do not export directly. To do it safely:
Ask the trader to name the factory making your goods, and check that factory too.
Write the factory name into the contract and require approval for any change.
Agree on the trader's role: who inspects, who is liable for defects, and how claims are handled.
Pay the trader's company account, and keep the factory's details on file.
Ask me to check
Factory or trading company is the first line of every verification I do. I read the registration, the insured headcount, the related companies and the certificates in Chinese, and run a live video walk-through that I direct. You can see what you get in the sample report, and a real example in we checked 9 machinery suppliers in Shandong.
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LocalAuditChina is an independent verification service, not a certification body. Reports are findings to support your purchasing decision.
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