Manufacturing In China: 4 Tips To Spot A Real Factory Vs. Trading Company In China In 2022
If you’re considering outsourcing production to China, there are certain things to know before embarking on the task like
- How to start?
- Who you can reach?
- What to do before placing an order?
- How much will it cost?
However, the most important thing is to make sure you are going to work with an actual factory rather than a trading company.
Why? Because when you work directly with the actual factory:
- Your spending will be less to get the same items, which increases your profit margin and reduces lead time.
- You can make changes to the product easier and quicker.
- Your product quality will be higher because you can check with your supplier now and then.
So, as you can imagine, it can be difficult to find out whether a supplier is a factory or just someone pretending to be one. Here are four tips you can use to figure this out.
1. Check The Business License
First and foremost, it’s a good idea to request a copy of your manufacturer’s business license which is called “营业执照” in Chinese.
Every legitimate company in China has a business license issued by a local branch of the Administration of Industry and Commerce (AIC). It is an official certificate, proving that the company has been registered with the authorities and operates legally.
If your potential supplier doesn’t have a business license, that’s a huge red flag. it’s best not to do any kind of business with them until they get everything sorted out on their end. No matter what they say, don’t risk your time and money.
If your supplier claims that they have a business license, it’s better to request a physical copy. It can be used as proof that your supplier is an actual manufacturer. In addition, if there is ever any dispute with your supplier, having a physical copy of their business license on file could be helpful.
Once you receive the business license, make sure you review it carefully. Keep in mind to check the business scope which should include words like “manufacture or produce” (生产，加工，制造)
if you don’t know Chinese, it’s ok.
Here is a simple way:
You can use your phone to scan the business license, extract words, and copy-paste to the Google translator. The business scope is the combination of some simple words so don’t worry about the correctness.
Verifying the business license is the first step when doing due diligence on a Chinese company. It allows you to verify that the company is legit and not a scam.
2. Check the Sample Address
Many Chinese manufacturing companies are willing to send out samples when you have a detailed plan for working with them.
One way that you can use this method is to verify if your chosen manufacturing supplier understands your requirements and quality standards.
Moreover, we advise checking the address of the sample package before disposing of it. Make sure it matches up with what is included on the business license that you requested beforehand.
If they are the same addresses, then this manufacturing supplier may well be a real factory rather than just someone acting as a middleman.
However, this isn’t always reliable.
The reason being is that some companies set up offices downtown whilst their factories are located outside of town due to cheaper rates for renting land.
In this case, even though the sample address might not be an office at that location, it still could be possible that they’re a real factory.
You have to check with your supplier to request both business licenses for the office and the factory.
3. Check the Facility Visuals
Now, many Chinese factories have the abilities and technologies to introduce themselves to the world through visualization.
Take Shield Works for example, we have invested heavily in digital presence such as
- Uploading our facility video online: enhance transparency across our manufacturing plant thoroughly.
- Creating a virtual facility tour on our homepage: show an immersive tour of our whole production environment.
- Posting images of the facility or factory tour on social platforms: keep our followers updated about our new visitors.
The reason for checking the facility visuals is that most foreign business owners can not come to China in person to make a physical facility tour to confirm the production environments, capabilities, and quality.
If a supplier tells you that they own a huge and state-of-the-art manufacturing plant, but cannot provide any proof yet, then it might be worth walking away from them until they can back up what they say with hard evidence.
By checking their facilities, you will have more confidence to build trust and reduce business risk.
4. Check The ISO Certifications
Typically, not every trading company has ISO certifications but the majority of manufacturing factories do.
This is because a factory needs some specific ISO certifications to keep operating.
However, some trading companies also have ISO certifications to deal exclusively in one product category and maintain a strong relationship with their manufacturers.
Working with such a trading company is the same as working with a real manufacturing company with a factory when it comes to price.
Meet Shield Works
When selecting a manufacturing company in China, you have taken into consideration many factors.
It’s important to list your needs and criteria before starting the process of narrowing down candidates or you risk being too hasty in making a decision without taking all necessary factors into account.
Working with a professional manufacturing company in China like Shield Works will save you time and reduce risks.
With our British ownership and management background, we take great pride in our over 17 years of international project experience and excellent team. Contact us for a no-cost consultation!