Factory or trading company: how to tell from the business licence
Author: John, Supplier verification and quality control, ShenzhenPublished: Updated:
Short answer: ask for a colour scan of the business licence, find the 18-digit Unified Social Credit Code, then read the business scope. If the scope describes production, manufacturing or processing of your product category, you are talking to a factory. If it describes wholesale, retail and import-export, you are talking to a trading company.
That distinction is worth 10-30% on your unit price, and much more than that on your ability to fix a quality problem.
The five fields that matter
Unified Social Credit Code. Eighteen characters, the Chinese equivalent of a company tax number. It is the key to every public check. If the scan is too blurry to read the code, it is not a scan, it is a decoration.
Company name in Chinese. The English name on the website has no legal standing. Only the Chinese name does, and it is the one that must appear on your contract and on the bank account you pay.
Business scope. The field that answers the question in this article’s title. Chinese business scopes are formulaic, so the wording is comparable across companies: production and processing language means a manufacturer, wholesale and import-export language means a trader. Many real factories hold both, which is normal, but a company with only trading wording does not own machines.
Registered capital. Not proof of anything on its own, since it is subscribed rather than paid in, but useful as context. A company claiming a large automated plant with tiny registered capital is worth a second look.
Date of establishment. A supplier founded four months ago that claims fifteen years of export experience is describing someone else’s factory.
The same five fields as a checklist:
| Field | What to read | What it settles |
|---|---|---|
| Unified Social Credit Code | 18 characters, legible on the scan | the key to every public registry check |
| Company name in Chinese | must match invoice and bank account | who you are actually contracting with |
| Business scope | production wording or trading wording | factory or middleman |
| Registered capital | subscribed, not paid in | context for the scale being claimed |
| Date of establishment | against the experience claimed | whether the story is theirs |
Why it changes your economics
Price. A trader adds a margin. That is their job and it is not dishonest, but you should know you are paying it.
Quality control. When something is wrong on the line, a factory can change it. A trader can only relay your complaint and hope. Every day of delay in that relay is a day of production you cannot recover.
Minimum order quantity. Traders can often take smaller orders by pooling, factories usually cannot. If your volumes are genuinely small, the middleman may be the correct answer.
Contracts and IP. An NNN agreement is worth what the counterparty is worth. Signing one with a trading company does not bind the factory that actually makes your product and holds your drawings.
The gap the licence does not close
The licence tells you what a company is allowed to do. It does not tell you what it actually does.
Plenty of companies hold manufacturing scope and subcontract every order. Plenty of listings on the big marketplaces show factory photos that belong to someone else. The licence eliminates the crude lies and narrows the question, but the last step is physical: someone stands in the building, looks at the machines and matches them against the claim.
That is the whole reason a one-day audit in Guangdong costs $500 and is often the cheapest money in the entire order.
A five-minute routine
- Request a colour scan of the licence and the Chinese company name.
- Read the business scope. Production wording or trading wording.
- Compare the licence name with the name on the proforma invoice and the bank account. All three must match.
- Look up the Unified Social Credit Code in the public registry.
- If anything does not line up, ask one direct question and read the answer, not the tone.
If the answers stack up and the order is meaningful, that is the moment to spend $300 on a desk check rather than the moment to wire a deposit.
What we do with it
A desk check is exactly this routine done in Chinese by someone who reads business scopes for a living, plus court records, credit filings and export history. It takes 3-5 days and costs $300, and the extended version at $500 adds references and a video call with the production site.
The part that does not show up in a price list: after twelve years of buying in Guangdong, we often already know the company, or know someone who shipped with them. That answer arrives before the report does.
Questions
Is it bad to buy from a trading company?
No, and sometimes it is the right call. A good trading company consolidates small orders, handles export paperwork and speaks English. The problem is not the middleman, it is the middleman you did not know about, because then you are paying a markup you never priced and you cannot fix quality at the source.
The supplier says the factory is in a group company with a different name. Is that a red flag?
Not necessarily, group structures are common. It becomes a flag when the invoice company, the licence company and the factory are three different names and nobody explains the relationship. Ask for the licences of all of them and for the reason. A straight answer takes one message.
Can I check the licence myself?
Yes. The Unified Social Credit Code can be looked up in the national enterprise credit publicity system, and commercial databases such as Tianyancha show shareholders, filings and court records. The catch is that everything is in Chinese and the machine translation of a business scope is often misleading.
What if they refuse to send the licence?
Treat it as an answer. The licence is a public document that every legitimate Chinese company sends dozens of times a year. Refusal, an unreadable photo, or a scan with the code blurred are all the same signal.