The single most repeated mistake first-time buyers make sourcing from China is paying factory pricing to a trading company. The markup is usually 10-25%. Sometimes the trading company is fine — they handle export documents, communication, samples. But you should know which one you are paying.

The hard part: trading companies have figured out the same product photos, the same factory videos and the same B2B platform certifications as real factories. Here are tests that actually separate them.

1. Ask for the business license

Every Chinese company has a 营业执照 — a national business licence. Real factories have a registered business scope (经营范围) that includes manufacturing (制造 / 生产). Trading companies have scopes around trade (贸易 / 销售 / 进出口).

The licence number is the 18-digit Unified Social Credit Code. You can verify it for free at gsxt.gov.cn (in Chinese). Look up the company, check what it is actually registered to do.

2. Ask for a video walkthrough — live, not pre-recorded

Pre-recorded factory videos are everywhere on B2B platforms. They prove nothing because trading companies can shoot a “factory tour” at any contracted maker. The test is live: ask the salesperson to WeChat or WhatsApp video-call from inside the factory.

If they can do it within 30 minutes during working hours, they almost certainly work inside the factory. If they need to schedule it three days out — that delay is them coordinating with the actual factory.

3. Match the phone number area code to the address

Real factory addresses are in industrial zones in second- or third-tier cities (Anji, Bazhou, Linyi, Foshan, Houjie). Trading companies are usually registered in Shenzhen, Guangzhou or Shanghai. If the address says Shenzhen but products are office chairs (which are made in Anji), that is a tell.

Phone number area code should match the registered address. Beijing area code +86 10 with a Hangzhou address is suspicious.

4. Ask for unit cost breakdown

Real factory people can explain their costs in detail: bare frame, foam, fabric, gas lift, base, casters, armrests, packing carton, labour, overhead, export packing. A trading-company contact will give you a total FOB price but get cagey when you ask “how much of that is the gas lift?”. They simply don’t know.

This is the single most reliable test in our experience.

5. Look at the response time pattern

Trading companies are office-based — they respond fast during working hours (9-6 China time) and not at all outside. Real factory salespeople reply messages from production floors and warehouses, often late evening or weekends.

Reply patterns that fit a 9-to-6 office schedule are more likely trading. Reply patterns that include 9 PM China time on a Wednesday or Saturday afternoon are more likely factory.

6. Ask about other models

Factories make a range of models in their own product line. Trading companies show you whatever the underlying factory makes, but they typically can’t easily switch you to a totally different category. Ask: “Do you also make bar stools?” If they say “we focus on office chairs”, probably a factory. If they say “yes we have many options” and the price feels strange — probably trading.

7. Check at the port

If your order is meaningful (US$30,000+), pay US$150 for a third-party pre-shipment inspection. The inspector tells you who actually shipped the goods — the carton labels, the export documents, the factory of origin. If it does not match the “factory” you ordered from, you are dealing with a trading company.

Is it always bad to use a trading company?

No. For small orders (under MOQ 100), trading companies can be useful — they aggregate orders and handle the export paperwork. The problem is paying factory pricing to trading companies for orders that should bypass them.

Our rule of thumb: for orders above 300 units of a stock model, you should be talking to the factory directly. Below that, a trader is often a reasonable middleman.

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