By SupplierVerify Team | Published: February 3, 2026
One of the most common frustrations in China sourcing is discovering that your "factory" is actually a trading company. While trading companies can be legitimate partners, paying a middleman factory-level prices erodes your margins — and misrepresenting their identity is a red flag in itself.
When you buy from a real factory, you typically get better pricing, direct communication on product changes, and greater quality control. Trading companies add a markup — often 10% to 30% — and may know little about the actual production process. Worse, some trading companies fabricate factory profiles with fake photos to appear as manufacturers.
Every Chinese company has a registered business scope (经营范围) on its official business license. This legal document states exactly what the company is authorized to do. A genuine manufacturer's scope will include terms like "生产" (production/manufacturing) or "制造" (fabrication). A trading company's scope will list "销售" (sales) or "贸易" (trading) without manufacturing authority.
Request the supplier's full Chinese company name and verify their business scope against the official government registry. If they refuse to share their Chinese legal name, that alone is a serious red flag.
Real factories require significant capital investment in machinery, facilities, and workers. China's public social security records show how many employees a company actually registers. A "large factory" claiming 500 workers but filing social security for only 5 people is almost certainly a trading office.
A legitimate manufacturer can easily provide:
Search the same product on 1688.com (Alibaba's domestic wholesale platform). If your "factory" quotes you a price far above the domestic wholesale price, they are likely a trading company — or adding an export premium you didn't agree to.
The most definitive approach is an independent, unannounced site visit. A third-party inspector can walk the factory floor, confirm machinery is operational, verify the workforce, and photograph the reality — without the supplier having time to stage anything.
Don't rely on a supplier's English-language website or Alibaba profile. Our Safety Shield Report verifies the official business scope, registered headcount, and operational reality — so you know whether you are dealing with a real factory or a middleman, before you send a deposit.