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Is my Chinese supplier a factory or a trading company? How to tell (2026)

Last updated: · By Sarah Liu, Thornfield Resources

Short answer: check the business scope (经营范围) on the supplier's business licence and its record on gsxt.gov.cn. A factory's scope normally includes production words such as 生产, 制造 or 加工; a trading company's scope lists only 销售, 批发, 贸易 or 货物进出口. Then test the claim: ask for a live video walk from the production line to the gate sign, and confirm that the company you pay is the same legal entity that runs the machines. Alibaba's "Verified" badge means a paid third-party inspection took place, not that the supplier makes your product.

Why does it matter if my supplier is a factory or a trading company?

It matters because the company you contract with may not be the company that holds your moulds, your drawings and the production line. Neither type is bad in itself. The problem is a trading company that presents itself as the factory.

IssueBuying direct from the factoryBuying through a trading company
PriceNo intermediary marginTrader's margin added, often not disclosed
Quality controlYou can speak to the people who run productionProblems pass through a middleman; the factory may change without notice
Drawings and IPConfidentiality terms can bind the company that receives your filesAn NDA with the trader may not bind the factory that actually gets the files
Moulds and toolingOwnership and release terms can be agreed with the holder of the steelYou may not know where the moulds are or who made them
Legal recourseA claim lands on the company with the assetsA judgment against a thinly capitalised trader may leave the factory out of reach

The China law firm Harris Sliwoski puts the fix simply: "Demand direct contracts with the party that actually controls production."

What does the business scope on the business licence tell you?

The business scope is the best free clue, because it is registered with the market regulator and shown on both the licence and the official register. Under the registration rules in force since March 2022, scope is split into general items (一般项目) and items needing a permit (许可项目), using standard wording published by the registration authority. Our company verification guide explains how to find the record.

Wording in the scopeEnglishWhat it suggests
生产, 制造, 加工Production, manufacture, processingThe company is registered to make goods. A good sign, not proof.
销售, 批发, 零售, 贸易Sales, wholesale, retail, tradeSelling goods. On its own, this points to a trading company.
货物进出口, 技术进出口Import and export of goods or technologyThe company can export. Both factories and traders often have this.
Both production and sales itemsMixedCommon for real factories, which sell what they make.

A scope that says "manufacture" proves only that the company is allowed to manufacture. Many factory owners also run a separate trading company for exports, so check which of the two you are being asked to pay.

Do registered capital and address show if it is a real factory?

They give weak clues only. Registered capital (注册资本) is the amount shareholders have promised to pay, not money in the bank, so a large figure proves nothing. The registered address is more useful. A suite in an office tower (for example "XX大厦XX室") with no separate production address suggests a trader. An address in an industrial zone (工业区, 工业园) fits a factory, but production can legally happen at a different site from the registered address, so ask where the plant is and check it against maps and satellite images.

Where the company has chosen to publish it, the annual report on the register can show the number of staff covered by social insurance. A "factory" with five insured staff is unlikely to run a large production line.

What do Alibaba "Manufacturer" and "Verified" labels actually prove?

They prove less than most buyers assume. Alibaba says every supplier must pass a basic business verification. Verified Supplier is Alibaba's top paid membership: an independent inspection company such as SGS, TÜV Rheinland or Intertek checks the business licence and, where relevant, the production lines, quality control and R&D, and buyers can download the report.

  • What a Verified badge shows: the company exists, paid for an inspection, and something was seen at the address on the inspection day.
  • What it does not show: that the inspected site makes your specific product, that the company you pay is the one inspected, or that certificates are genuine. Alibaba states that it does not inspect or guarantee product or certificate authenticity.
  • The business type field: "Manufacturer", "Trading Company" or both is how the supplier describes itself. Treat it as a claim unless the inspection report covers it.
  • Read the report, not the badge: check the legal name, the address inspected, the date, and the photos of machinery against what you are buying.

What questions should I ask a Chinese supplier to find out?

Ask questions that a factory can answer at once and a trader has to check with someone else.

  • Legal name and code: the full Chinese name and the 18-character Unified Social Credit Code of the company that will sign and invoice.
  • Production address: where exactly the goods are made, and which legal entity owns that site.
  • Equipment: a list of the main machines for your process, with numbers and capacity per month.
  • Process steps: which steps are done in-house and which are subcontracted (plating, heat treatment, moulding, packaging).
  • Moulds: who makes the moulds, where they will be kept, and whether the holder will sign a mould ownership agreement.
  • Invoicing and bank: will the contract, the commercial invoice and the bank account all be in the same company name as the licence?

How can I tell on a video call or a site visit?

Ask for a live, unplanned walk-through rather than a prepared video.

  1. Start at the machine: ask to see your product, or a similar part, being made now, and the raw material stock next to it.
  2. Walk to the gate: ask the person to walk without cutting from the line to the factory gate and show the company name sign. It should match the legal name on the licence.
  3. See the licence on the wall: Chinese rules require the business licence to be displayed prominently at the company's premises. Ask to see it and compare the code with the copy you were sent.
  4. Talk to production: ask a technical question that only the production or quality manager can answer, and see who answers.
  5. On a visit, check the paperwork: look for the company name on delivery notes, machine asset tags and quality records. A different name on everything means you are visiting someone else's factory.

When is buying from a trading company fine?

A trading company is often the right choice, as long as it is open about what it is. It can make sense when:

  • Your order is small: below a factory's minimum order quantity.
  • You buy many different items: one trader can consolidate products from several factories into one shipment.
  • You need export support: English-speaking staff, export documents and inspection handling.
  • The trader adds real work: its own quality control staff at the factory, or a long relationship with a specialist mill.

In that case, ask the trader to name the factory, to accept a three-party agreement covering moulds and confidentiality, and to let you or your inspector visit.

How can Thornfield help?

Thornfield Resources is a London company (Companies House 17162127) that works in English and Mandarin for UK and European buyers. Our supplier checks read the Chinese register, test whether a supplier is a factory and confirm the bank account name: an Express Check costs £175 and a Full Supplier Check £450, while site verification and factory visits are quoted. We also help with sourcing and disputes. We are paid only by clients and take no factory commissions. We are not a law firm; contract work goes to licensed lawyers. Contact us with the supplier's name.

Common questions

Is it bad if my Alibaba supplier is a trading company?

No. Many trading companies are reliable and useful for small or mixed orders. The risk is a trader that hides what it is, because you then cannot control the factory, the moulds or the confidentiality of your drawings.

Can a company be both a manufacturer and a trading company?

Yes. Many factories register both production and sales in their scope, and many factory owners run a separate trading company. Check which legal entity signs your contract and receives your money.

Does Alibaba's Verified Supplier badge mean it is a factory?

No. It means an independent inspection company checked the business and its site for a paid membership. Read the downloadable report to see which address and which production lines were inspected.

Why do trading companies say they are factories?

Buyers often prefer factories and expect lower prices from them, so some traders use the word loosely. Some also work closely with one or two factories and describe them as "our factory".

How do I find the factory behind a trading company?

Ask the trader directly; a good one will name it. Otherwise, a factory visit, inspection reports and the shipping documents can reveal the manufacturer, but you may need a Mandarin speaker to follow it up.

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