How to check the legitimacy of new Chinese supplier?
- Written by News Co
1. Is your supplier a manufacturer or a trader?
What's the problem
70% of companies you find on Chinese marketplaces are not original manufacturers, they are intermediaries.
What can Company Inspector do
Company Inspector will check an official Chinese name of a company, its business scope, and number, position of employees, as well as registered trademarks and licenses.
How to use that
You will understand who you are dealing with and how they will be able to resolve issues related to product quality.
2. Do they have a valid export permit and experience in overseas sales?
What's the problem
If a company doesn't have an export permit, then most likely invoices will be issued from another entity. This is a risk of scam.
What can Company Inspector do
Company Inspector will check a permit expiration date and validity, analyze a company's shipments for the last 12 months in customs.
How to use that
You will make sure your supplier is involved in international trade, has clients abroad, valid export documents.
3. What is an ownership structure, who are the final beneficiaries, and risks in affiliated companies?
What's the problem:
Chinese owners may use one company as a cover for trade while keeping unprofitable and unreliable companies.
What can Company Inspector do
Company Inspector will analyze an entire group of affiliated business owners as well as key staff members and estimate the risk for every affiliated company.
How to use that
Know your supplier from all sides. You will see a list of final beneficiaries and risks that may harm your supplier.
4. How to estimate the size of the company
What's the problem:
Chinese companies can introduce themselves as large manufacturers or suppliers, but in reality it may be a small trading company with one or two managers. Therefore, they will redirect your order to other manufacturers or traders and as a result they will not be able to influence the quality of the products themselves.
What can Company Inspector do
Company Inspector will analyze the size of registered capital and compare it with the peer companies. We check financial information and the number of employees for the last four years. We also analyze job offers published by the company for several years.
How to use that
You can estimate the size of the company. This will help you to understand if you are dealing with a small company or with an intermediary instead of manufacturer, therefore reducing the risk of getting poor quality late.
5. How to estimate risks of dealing with an insolvent company
What's the problem:
The number of bankruptcy filings in China doubled in 2019 compared to 2017.
What can Company Inspector do
Company Inspector can provide financials of the company for the last four years. We check court cases and judgements. We analyze changes in the number of employees for several years. We can provide red flags on the company that indicate critical business risks.
How to use that
You can see the changes in the status of the company during the last few years and ensure in your contacts.
Do you want to check a new supplier with Company Inspector?
