On most B2B platforms, nearly every supplier calls itself a factory. Many are not. They are trading companies: businesses that take your order and place it with a factory you never see. That isn't automatically bad. But if you don't know which one you're dealing with, you don't know who is actually responsible for your product.
What a trading company does
A trading company sells products it doesn't make. It finds a factory, adds a margin and handles communication, export paperwork and sometimes consolidation of goods from several factories.
For some buyers that is useful. A good trading company can source across many product categories, manage small orders that factories won't accept, and deal with factories that don't speak English or don't export directly.
Why it matters to you
The problems start when a trading company presents itself as the manufacturer. Then several things change without you knowing:
- Price. You pay the trader's margin on top of the factory price, often while believing you're negotiating directly.
- Control. You can't inspect a production line you don't know about. Specification changes pass through a middleman.
- Continuity. The trader can move your order to a different factory, and a cheaper one, between batches. Quality changes and nobody tells you.
- Documentation. Test reports and certificates may belong to a factory that isn't making your goods, or to a different model altogether.
- Accountability. If something goes wrong, the company you paid may own no production assets at all.
How to tell them apart
No single check is conclusive. Together, these usually are.
The business scope. Every Chinese company's registration lists what it is permitted to do (经营范围). Manufacturers typically include production or processing terms such as 生产, 制造 or 加工. Trading companies usually list only sales, wholesale or import and export (销售, 批发, 进出口). Names containing 贸易 (trade) point to trading; 工贸 (industry and trade) can be either.
The number of insured employees. Annual reports filed with the registry show how many staff the company pays social insurance for (参保人数). A company claiming a 300-person factory with five insured employees needs to explain itself.
The address. A registered address in an office tower or a commercial district suggests a sales office. Factories are usually in industrial zones. Check the address on a map.
The product range. A supplier offering power banks, garden furniture and cosmetics is not manufacturing all three.
Direct questions. Ask for the address of the production site, the number of production lines, and a video call walking through the line making your product. Manufacturers can usually answer quickly and specifically.
A visit. The only conclusive check. A factory has machines, raw materials, work in progress and quality records. An office has samples and a meeting room.
When a trading company is the right choice
Working with a trader is a legitimate choice when it is a conscious one. It can make sense for small or mixed orders, for products assembled from many sources, or when you value one point of contact over the lowest price.
What matters is transparency. A good trading company tells you it is one, tells you which factory makes your goods, and allows you or your inspector into that factory.
What to do next
Before committing, find out which kind of company you're dealing with. If it's a trader, ask for the name of the manufacturer and verify that company too. The certificates and test reports you rely on should belong to the company that actually makes your product.