Factory or Trading Company? 7 Ways to Tell Before You Wire the Deposit

Open any B2B marketplace and search "hi-vis vest manufacturer". Hundreds of results, and nearly every profile says the same thing: "We are a professional factory with 10 years experience." Industry rule of thumb: about a third of those are factories. The rest are trading companies — offices with a laptop, a WeChat account, and a list of real factories they buy from.

A trader is not a scam. Some are excellent consolidators. The problem is paying factory-direct expectations for a middleman service: 10-25% margin added to every unit, your technical questions relayed through a salesperson who has never touched the fabric, and a deposit sent to a company that controls nothing about your production. Here is how to tell them apart from your desk — seven checks, in the order we would run them.

1. The Business License (营业执照) — The Legal Truth

Every Chinese company has a business license with a legally binding business scope (经营范围) line. This is the single most reliable document in Chinese B2B:

- 生产 / 制造 / 加工 (manufacture / produce / process) of garments → licensed factory

• 贸易 / 进出口 / 批发 / 销售 without manufacturing words → trading company

  Ask for a photo of the license. A real factory sends it within a day — we keep ours in the same folder as the ISO certificates. Hesitation, "it's being renewed", or a blurry crop hiding the scope line: red flag number one. While you have it, note the registered capital (real garment factories typically register several million RMB) and the registered address — you will need it for check #2.

  2. The Address Test — Office Tower vs Industrial Zone

  Take the registered address and the "factory address" from the website, and look both up on a map. Then compare:

  - Registered in a commercial office tower (写字楼) downtown, "factory" in an industrial zone 40km away → classic trader setup. The office is real; the factory belongs to someone else.

• Both addresses in the same industrial zone, ideally the same gate number → factory.
• Bonus check: search the address plus "招聘" (recruiting). Real factories are constantly hiring sewing operators; job ads for the address naming sewing, cutting and QC roles are strong evidence production happens there.

  3. The Live Video Walk — Scheduled Is Staged

  Every supplier now offers "factory video tours" — pre-recorded, beautifully lit, sometimes filmed at a factory they visited once. The counter-move: ask for an unannounced live video call during working hours and ask the rep to walk from the office to the cutting room, then down a sewing line, then to the warehouse. It takes five minutes on a phone.

  A factory rep grumbles and does it. A trader has to "check with the factory" and call you back tomorrow — because they need to arrange access to someone else's plant. What you want to see: cutting tables with lay markers, rows of sewing machines with work-in-progress bundles, in-line QC stations, and a warehouse with fabric rolls — not a sample room and a logo wall.

  4. The Audit Report — Only Real Factories Have One

  Social compliance audits — amfori BSCI, SMETA (Sedex) — audit a physical production site: machinery, worker interviews, payroll records, dormitories, fire exits. A trading company has none of these and cannot be audited as a manufacturer.

  So ask: "Send me your latest BSCI or SMETA report." Then do the one thing almost nobody does — read the company name and address on the report. If the name matches who you are paying and the address matches the factory, the audit is theirs. If the report names a different company, your goods will be made at that third-party plant — which may be fine, but you deserve to know its name and audit it yourself. A trader caught this way will say "that's our partner factory" — at which point you have your answer.

  5. Technical Ping-Pong — Time the Answers

  Send three technical questions a salesperson cannot answer from memory, for example: "What gsm is your 300D oxford after PU coating?", "Can your reflective tape hold ISO 15797 industrial wash at 75°C for 50 cycles?", "What's your AQL sampling plan for a 5,000-piece order?"

  A factory's export manager answers from the floor — often the same day, sometimes with photos of the test reports. A trader's answer comes tomorrow, prefaced with "our engineer says..." — because your question made a round trip to the real factory. One relayed answer proves nothing; three in a row is a pattern. Bonus tell: traders dodge the question "can we change the fabric?" with a flat yes or no, while factories ask why and quote the difference.

  6. Export Records — Whose Name Is on the Container?

  Chinese export customs data records the shipper on every container. Services like ImportGenius, Panjiva, or ImportYeti let you search the company name. If the supplier ships under its own name, regularly, with product descriptions matching your category — factory behaviour. If there are no records under their name, they export through a third-party agent — possible for a small factory, common for traders. This check costs money and is worth it once you are shortlisting for a serious program, not for the first email.

  7. The Proforma Invoice — Follow the Money

  Everything above is research; the PI is legal reality. The company named on the PI is who receives your deposit and who you have recourse against. Three things must match: the PI company name, the business license, and the receiving bank account name. "Please pay our export agent" or "our group company handles USD" means your contract is with an entity that owns no sewing machines. If a dispute lands in arbitration, that entity is who you will be chasing — choose deliberately.

  The Scorecard

  One red flag proves nothing — some excellent small factories export through agents, and some honest traders add real value. But three or more of these, and you should assume you are talking to a trader and price accordingly:

  1. License scope says trade, not manufacture

2. Office address ≠ factory address 3. Live video walk is "not convenient today" 4. Audit report names a different company 5. Technical answers always arrive a day late 6. No export records under their name 7. PI payee differs from the company you negotiated with

And if they pass all seven — congratulations, you found a factory. Now the real work starts: fabric specs, tape grades, wash ratings, and a tech pack that survives their production floor. That is what the rest of this blog is for.

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Denny Lin is the export manager at a Fujian workwear factory — 865 workers, 80 production lines, audited under amfori BSCI and SCAN. Ask us the seven questions: our business license, audit reports and a live walk down the sewing line are one email away.