Factory or Trading Company? How to Tell at the Canton Fair

Almost every booth at the Canton Fair will tell you it is a factory. Some are. Some are trading companies that buy from factories. Some are a factory and a trading company owned by the same family. From the aisle, they look identical.

I should say first that I run a trading company myself, so I am not going to tell you traders are bad. The point is to know which one you are dealing with, because it changes the price you should expect, the questions they can answer and who is responsible when something goes wrong.

Here are 8 ways to tell, in the order you can use them: at the booth first, then from your desk.

At the booth

1. Look at the product range

A factory makes a narrow family of products, and usually shows many versions of the same thing. A booth showing packing machines, kitchen tools and LED lights together is a trader. Nobody manufactures all three.

2. Ask a production question, not a sales question

Sales questions are easy for anyone: price, lead time, minimum order. Ask something only the maker would know. Which parts do you make in-house and which do you buy? What is your monthly output of this model? What changed between last year’s version and this one?

You are not testing whether the answer is right. You are watching whether the person answers at once, or says “I will check with our engineer” for every question.

3. Ask to visit this week

Many buyers visit factories in the days between phases. Ask: “Can I come on Thursday?” A factory says yes and sends a driver. A trader needs a few days to arrange it, or suggests meeting at the office first.

4. Ask for the business licence on the spot

Most exhibitors have a photo of it on their phone. Take a picture. The next four checks all depend on it.

Back at your desk

5. Read the Chinese company name

The legal name is the Chinese one, and it usually says what kind of company it is. Names containing the words for “trading” or “import and export” are nearly always traders. Names containing “manufacturing”, “machinery factory” or a similar production word point to a factory, though a name alone proves nothing. Words like “technology” or “industrial” tell you nothing either way.

6. Read the business scope

The licence lists what the company is registered to do. A manufacturer’s scope includes production, manufacturing or processing of its product category. A trader’s scope is about sales, wholesale, and import and export of goods. If you cannot read Chinese, a translation app on the photo is enough for this.

7. Check the address

A factory is registered where factories are: an industrial zone, usually outside the city. An address on the 18th floor of an office tower is an office. Look it up on a map.

8. Check whose name is on the certificates

Ask for the product certificates, for example the CE documents or the ISO 9001 certificate. They are issued to a named company. If the name on the certificate is not the company you are talking to, you have found the real manufacturer.

The common in-between case

Many Chinese factories export through a separate sales company. The factory is one legal entity and the import-export company is another, often with the same owner. This is normal and there are ordinary tax and administrative reasons for it.

It becomes a risk only when nobody explains it. If your contract is with the trading entity, your legal claim is against the trading entity, which may own nothing. Ask for both licences, ask how the two companies are related, and make sure the name on the contract, the invoice and the bank account is the same one.

When a trading company is the better choice

• You are buying small quantities, below a factory’s minimum order.
• You need several product types in one shipment.
• The factory has no export experience and nobody who can handle documents in English.
• You want one party responsible for sourcing, checking and shipping.

A good trader earns the margin by doing that work. What you should not accept is a trader who claims to be the factory, because that is a supplier who has already misled you once before the first order.

A quick comparison

	Factory	Trading company
Price	Lower at volume	Higher by a margin
Minimum order	Higher	Lower, more flexible
Technical answers	Direct from engineers	Passed along, slower
Product range	Narrow	Wide
Customisation	Possible, needs volume	Depends on their factory
Communication and export paperwork	Varies a lot	Usually smooth

Want a second opinion on a supplier you met?

Send me the company name, the licence if you have it, and the quotation. For USD 99 I check one supplier and one quotation and give you a written answer in 2 working days, including whether the company is a manufacturer or a trader and whether the quotation is safe to act on.

• Canton Fair Supplier Check
• The full checklist: How to verify a Canton Fair supplier before paying a deposit
• Or ask for a free first look

FAQ

Are trading companies allowed to exhibit at the Canton Fair?

Yes. Both manufacturers and trading companies exhibit. A booth does not tell you which one a company is.

Is it always cheaper to buy from the factory?

Not always. For small orders a factory may quote high or refuse, and a trader who buys from that factory every month can sometimes get a better price than a new buyer would.

How can I check if a Chinese company is a manufacturer without visiting?

Read the business scope on the licence, check the registered address, ask whose name is on the certificates, and ask for a live video call from the workshop.

Maggie Yue, Hangzhou Zhenbao Trading Co., Ltd. This service is independent and is not affiliated with the Canton Fair.