A large share of Chinese export suppliers are trading companies: they source from factories and sell on. This is a legitimate and often useful arrangement, particularly for smaller orders. The risk is not the intermediary. The risk is paying one while believing you are paying the manufacturer, because everything you plan around — price, lead time, quality control and recourse — depends on which it is.
- Trading companies are normal and often the right choice for small orders.
- A factory has a production capability; a trading company has relationships.
- The business licence scope is the most direct evidence of which you have.
- Recourse differs: an intermediary can pass on a complaint, not resolve it.
- Ask directly. Most suppliers answer honestly when asked plainly.
Why it changes what you should expect
The distinction is not about trustworthiness. It is about what the party on the other end of the contract is able to do when something needs to change.
| Question | Factory | Trading company |
|---|---|---|
| Can they change a specification mid-run? | Directly | Only by asking the maker |
| Who holds the quality problem? | Them | A third party you have no contract with |
| Minimum order | Usually higher | Usually lower |
| Range of products | Narrow | Broad, often across categories |
A supplier offering 4 unrelated product categories is very unlikely to manufacture all of them. That is a signal rather than a fault, and it should shape what you ask for rather than whether you proceed.
How to tell which one you have
- 1Read the business scope on the business licence — manufacturing and trading read differently.
- 2Ask what else they make, and listen for breadth that no single plant would cover.
- 3Ask for the address of the production site and compare it with the registered address.
- 4Ask who would attend a pre-shipment inspection and in what capacity.
- 5Ask the question directly. It is a normal commercial question, not an accusation.
When an intermediary is the better option
For a first order, a mixed container or a quantity below a factory minimum, a trading company is frequently the only workable route and often the cheaper one once the alternatives are costed properly.
- They accept smaller quantities than a plant will run.
- They consolidate several products into one order and one payment.
- They usually handle export documentation as routine work.
- They absorb the coordination that would otherwise be yours.
The margin they take is the price of that coordination. Judge it against what doing the same work yourself would cost, not against the factory price you were never able to access.
What to fix in the paperwork either way
Whichever you are dealing with, the contract should name the party you are actually paying and the goods you are actually buying. Problems arise when the documents describe one relationship and the money follows another.
- The company on the invoice, the contract and the bank account should be the same.
- If the goods will ship from a different company, that should be stated rather than discovered.
- Quality standards belong in writing with the party you can hold to them.
- Inspection rights are worth more when the contract names who grants access.
None of this requires distrust. It requires that the paperwork describe the arrangement that actually exists, which is the only version anyone can act on later.
Frequently asked questions
Is it cheaper to buy direct from the factory?
Often on unit price, and not always overall. Factories usually require larger quantities and less handholding, so the saving assumes you can meet the minimum and manage the process yourself.
My supplier says they are a factory but the licence says trading.
Ask about the difference before you pay. There are ordinary explanations, including a separate manufacturing entity in the same group, and each of them can be evidenced.
Does it change how I should pay?
It changes who you are paying, so it changes what the beneficiary name should be. The account name should always match the company named on the contract, whichever type it is.
SilkBridge helps importers in Kenya, Uganda and Tanzania pay Chinese suppliers in RMB — documented, reviewed in Nairobi, and tracked to payout.
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