A significant share of the companies that call themselves a factory in correspondence are not factories. That is not always deception — but it is always a mark-up you pay for a service you never agreed to.
The difference between a factory and a trading company shows up in two things. The first is price: an extra layer appears between you and production, and every layer has its own margin. The second matters more: responsibility for the quality of the batch. A factory has a production process that can be verified, and a reputation it can lose. A middleman has only correspondence.
Seven signs do not work on their own
None of the signs below is proof by itself. A real company may have no export rights and still be a genuine manufacturer. A trading company may have a flawless licence. The conclusion is drawn from the combination: if two or three signs coincide, the probability of a middleman is high; if five do, the conversation is over.
The fastest and most reliable sign. The Chinese registration certificate contains a list of business activities, and manufacturing and trading activities are distinguished by their wording.
The list includes manufacturing activities
Wording meaning “production”, “manufacture”, “processing” points to a manufacturing function. If the list consists only of “wholesale and retail trade”, “import and export of goods”, “technical consulting” — you are dealing with a trading company, whatever it calls itself in its email.
What it means: there is a mark-up but no production.
Risk signal
They send a screenshot or photograph of the document but refuse to name the list of business activities in words. The certificate is a public document, and any real manufacturer knows what is written in it. Dodging an answer to this question is informative in itself.
Production has start-up costs: re-tooling the line, preparing the tooling, buying a batch of raw material. It follows that a factory has a minimum volume below which it will not work. That is not greed, it is economics.
A trading company has no such constraint: it simply resells what is in stock and can ship any quantity. That is precisely why a willingness to take on any volume is a sign, not a virtue.
Risk signal
They agree to an order far below the industry norm — tens of units where the usual minimum runs into thousands. Or, conversely, they name a minimum volume, but when asked “and if we need less?” they answer “well, we can discuss it” — at a factory the minimum volume is not up for discussion, it is set by the cost of the changeover.
This is the most informative sign of all, and the most underused. The point is that technical questions fall into two types: those you can answer by paraphrasing a specification, and those you can answer only from production experience.
The first type: “what are the specifications?”, “what material?”, “do you have this size?”. A trading middleman answers these no worse than a factory: he has a catalogue.
The second type — questions about what goes wrong. Here the catalogue does not help.
Three questions of the second type
“Which operation in making this item most often produces defects, and why?”
A production person answers concretely: the operation, the cause, what they do about it. He lives with it daily.
“What will change in the item if we replace the material with a cheaper one?”
A factory knows, because changing the material means a changeover it has discussed with clients many times. A middleman will repeat “we use only high-quality materials”.
“What dimensional deviation do you consider normal in serial production?”
A factory will name a figure and explain the tolerance. A middleman will answer “everything is within standard” without naming the standard.
Risk signal
The answers come down to “there is no problem with that”, “we will check and get back to you”, “I need to ask the factory”. The last wording is especially telling: if your contact is the factory, he does not need to ask anyone. He is the source of the answer.
Separately: if a technical question requires “checking”, ask with whom exactly. The answer “with our technical department” is acceptable; the answer “with our supplier” settles the question of what the counterparty really is.
Photographs prove nothing: they can be taken from the internet, bought, or filmed at someone else’s plant. Video proves considerably more — if you set the filming conditions.
The conditions must be specific. Not “send us a video of your production”, but “show a continuous walk-through of the workshop with the camera, and turn the phone towards the equipment so the nameplate with the model is visible”.
What must be in frame
The workshop as a whole, not a corner with finished products. Equipment in operation. The nameplate with the machine’s marking and model. Staff at their stations. Ideally raw material or blanks — they cannot be “a finished-goods warehouse”, those are different things.
Why: from the machine model you can check the equipment manufacturer and estimate the typical capacity of the line.
What must not be in frame
Only a finished-goods warehouse, only a packing area, only an office, only a showroom. A company that does not manufacture but consolidates orders can have all of that.
Why: a warehouse is a sign of inventory, not of production capacity.
Risk signal
They send photographs instead of video. The video shows only the finished-goods warehouse or the packing area, not the process. They reply that “production is at another site” and it is impossible to go there now. Or they send a video from the internet — a reverse image search of a frame shows it on someone else’s site. Any two of these signs together mean a middleman.
A manufacturing enterprise is registered at the address where its workshop stands. That is not always the case — sometimes the registration and the site differ, but the difference must be explainable.
The nature of the address
If the registered address falls on a residential building, a business centre or an address used for mass registration of offices, there is most likely no workshop at that address. Check the address on the map: an industrial park zone looks like an industrial zone, not like an office building in the centre.
What it means: either you are dealing with a trading company, or the address was changed after registration.
Date of registration and how often the address changes
A company registered two or three years ago that has changed several addresses since usually has no production site of its own: it moves between rented premises. For a manufacturing enterprise moving is difficult and expensive — a line is not relocated in a week.
What it means: long-term liability for batch quality is unlikely.
Names similar to ones you know
A separate scheme is registering a company whose name differs from the real factory’s name by one or two characters. Syntactically similar, legally a different entity. You think you are still working with the previous supplier — while the contract has been signed with a new company that has no history and no assets.
What it means: always check the full legal name, not the short one.
Changing the item means re-tooling production. That takes time, money and technical capability. So a question about customisation works as a test: a trading company can sell what it has, but it cannot change what it does not manufacture.
Wording of the request
“We need to change one parameter in the specification — this one. Is that possible? If so, what is the minimum volume in that case, what happens to the lead time, and how will the unit price change?”
A factory will answer substantively: it will name the minimum volume for the customisation, explain what needs to be done, and state the effect on the lead time. A middleman either answers “yes, no problem” without specifying conditions (which means the question was not understood), or goes off to “check” and comes back days later with wording that contains no technical detail.
Risk signal
They answer the customisation question with agreement but no specifics — that is the most common response, and it means the other side has not assessed the task. Or they quote a surcharge that relates neither to the cost of the tooling nor to the length of the changeover: the figure is a guess, because they have nothing to calculate it with.
A separate sign: no limits on marking. If a company is ready to apply any marking of yours at any stage without questions about the marking technology — ask who will do it and with what.
The last sign is behavioural, and it is the simplest to test. It requires neither documents nor technical knowledge.
First test: the direct question. Ask straight out: “Are you a manufacturer or a trading company?” The answer “we are a manufacturer” with no qualification is not an answer. A substantive answer looks different: “we make some items ourselves and buy others from partner plants” — and that is a normal, honest answer that you can work with. The problem is not that you are a middleman, but that you are hiding it.
Second test: the refusal. Say that you would first like to visit the production site or order an independent inspection before shipment. A factory with a real workshop will treat this neutrally: it shows the workshop regularly. A concealed middleman will start looking for reasons why that is inconvenient precisely now.
Risk signal
They refuse an independent inspection, citing the production schedule. They give no direct answer to the question about the nature of the company. They respond to the request for a visit with a long chain of objective reasons — the longer the explanation, the less plausible it is. They insist on prepayment before any confirmation of the production base.
Here we have to be honest. A trading company is not a defect in itself. Sometimes it is useful and even necessary:
The question is not whether there is a middleman in front of you. The question is what exactly you are paying the mark-up for, and whether you know it. If a trading company consolidates, checks quality, takes on the formalities and is responsible for the batch — the mark-up pays for work you would otherwise do yourself. If the mark-up pays only for the fact that you approached it thinking it was a factory — you are paying for an illusion.
One criterion instead of seven signs
The practical conclusion from all of this: always establish who is the party to the contract and who is responsible if the batch does not conform. If the contract is signed with a company that has no production, that is not necessarily a problem — but then quality has to be secured in another way: inspection, samples, contractual terms. If there is no such mechanism and the mark-up is there, responsibility for quality rests on nobody.
We buy directly from factories and do not disclose the source. We are the party to the contract — which means the risk of non-conformity, missed deadlines and batch quality lies with us, not with you. Verification of the production base is included in the cost of the procurement.
Send the company name, the licence or the correspondence. We will check whether the counterparty is a manufacturer and tell you which of the seven signs are already confirmed in your case and which are worth clarifying. The first review is free.
