5 Things You Need to Know

About Chinese Company Verification and Background Checks

If you’re planning to start doing business with a Chinese company for the first time you need to be aware of a few things.

China is a vast country. It is far away. And it is very foreign. Meaning that the language is very different; only about 1% of Chinese people speak any reasonable level of English. There are also millions of enterprises active in China; not all of them legally.

If you encounter a problem in your business dealings it will be very difficult, if not impossible, to resolve. It is, therefore, imperative that you make sure you’re dealing with a legitimate, legal and reputable partner.

There are some things that you need to consider when embarking on a background check of any Chinese entity.


Confirm who you are dealing with


Establish the company’s credentials


Check the company’s business reputation and competence


Agree mutually acceptable payment terms


Use a professional consultant

Confirm who you are dealing with

clothing business partner

Use web searches and Chinese e-commerce directories such as Alibaba to identify potential business partners.

Next, visit the company website and check their registration and contact details, and terms and conditions.

Try to locate the company on Google Maps. This may not always work but if you do locate the company it would be a positive sign.

Check the phone number and establish whether it’s a landline or mobile. Use an application like Truecaller. This may confirm the owner of the number as well as the location if it is a landline. If only a mobile number is listed it would be somewhat of a red flag. If you can, call the number provided and verify the company name.

Do not take anything at face value at first. Make sure that you have identified the correct legal entity. Do not feel bad about asking questions. It is your right.

Establish the company’s credentials

Do some research on these businesses. Search for the company name together with the words scam, fake, and review.

Cross-reference reviewer details if possible to confirm that the reviews are genuine and posted by third parties. Fake reviews are more common than most people would think.

You could check the Chinese court databases for any cases against the company and particularly for convictions or fines. This is only available in Chinese so you would need a translator. If this turns anything up, discard the company.

When you make your initial trade inquiries, mention that you will be conducting a factory audit. Any reluctance or evasion of the subject would be a negative sign. Of course, if you have the means then you should follow through with the audit. Alternatively, a quality control company would be able to perform the audit on your behalf. A clean audit finding would be the ultimate assurance.

Verify the business license. Several agencies will provide this service for a nominal fee.

Check the company’s business reputation and competence

Search on the various e-commerce platforms and B2B directories. Examples of B2B platforms are:

Alibaba.com. Founded in 1999, Alibaba is perhaps the best-known platform and is often the first port of call for customers looking to source products from China.  

GlobalSources.com. Global Sources has upwards of a million customers in over 240 countries.  

Made-in-China.com. This platform was started in 1996 and is considered to be a leading source for electronic products.

TradeKey.com. Trade Key was established in 2006 and serves more than 240 countries. It is one of the largest trade platforms in China.

DIYTrade.com. Launched in 1999 as eBigChina.com, and renamed in 2006, DIYTrade is also a household name and represents millions of products from all over the world.  

Should you research consumer reviews of these platforms, you will find, generally, very low scores. This is because the platforms host thousands of sellers and it’s inevitable that there will be scammers or unreliable suppliers among them. These platforms are, in themselves, legitimate and reputable.

Most suppliers in China will list on several of these platforms so you should be able to check the consistency of their offerings as well as the corporate information that they publish.

A check on minimum order quantities may give you an indication of a supplier’s capacity. A word of caution though; this is no guarantee that the company is not just a reseller that may disclaim responsibility if things go wrong.

Agree mutually acceptable payment terms


Most scams only become evident when payment has been irrevocably remitted and no product is forthcoming. Inquiries go unanswered or suddenly no one speaks any English.

Popular worldwide payment methods include Western Union and Moneygram. These payment platforms are fraught with risk, though, because you cannot recover your money if the transaction turns out to be a scam. If a supplier insists on any of these methods, alarm bells should be ringing very loudly.

Chian has developed several reliable and safe platforms similar to PayPal, namely WeChat Pay, AliPay, UnionPay, and TenPay. These platforms are all considered safe and secure. The downside is that they may not be available in some countries.

Some companies may be open to receiving payment through interbank Electronic Funds Transfer (EFT). The parties agree on a payment schedule within the contract. Although this reduces the financial risk, there still is the possibility that the suppliers may demand a down payment and then renege on the deal.

 Probably the safest payment mechanism is a Letter of Credit (LC). This is a tripartite agreement between the customer, the supplier, and a bank. Payment is guaranteed subject to the fulfillment of certain conditions. Conditions would, as a minimum, include delivery and acceptance of the goods. There may be other requirements to be mutually agreed upon. Letters of Credit are not widely accepted by suppliers in China and would certainly only apply to higher-value transactions.

In a nutshell, if a supplier insists on the “instant” payment methods, be wary. If they agree to an EFT or LC they are probably a far safer bet.

Use a professional consultant

If the DIY approach sounds a bit daunting, you have the choice of paying a consultant to do it all for you. You would engage a legal or accounting firm based in China to carry out the whole background check and due diligence for you. For a fee, of course.

The benefit is that they would also draft the contract for you and provide you with some level of comfort.

Having considered all of these factors, you should now be confident that you can conduct business safely with Chinese trading partners.

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