Many clients ordered our service to help them check whether a Chinese company exists. But this is just the first step in verifying a Chinese company. Before making your final business decision, you should also check its lies or exaggerations on its website as well as its overall strength and credit background. In this article, I will show you the aspects that we normally take into consideration when we verify a Chinese company.
1. Verify its business license.
Always remember to ask your Chinese supplier to provide its business license before talking about anything further. If he/she refuses to send it, just walk away.
You can check whether a Chinese business license is real on China’s National Enterprise Credit Information Publicity System (国家企业信用信息公示平台) And here is how:
- Input the Unified Social Credit Code (统一社会信用代码) in the search box, and click the search button (“查询”) on the right.
- Cross-check the information on your supplier’s business license with that shown in this system. (You may need Google Translate to help you.)
You can find more ways to verify a Chinese business license in this article: How to Verify A Chinese Company’s Business License
E.g. If you crosscheck this company’s Chinese name (杭州金迈进出口有限公司) with its English name (Hangzhou Kingmai Meditech Co., Ltd.) on its website, you will find that its official Chinese name has nothing to do with medical supplies.
This is the step where you can do it yourself. But do not stop your investigation here. In our basic verification report, we will also help our clients check the following aspects. If you want to do it yourself, you should take these aspects into account too.
2. Check a Chinese company’s industry, the number of employees, paid-up capital to get a glimpse into its overall strength.
It is very common that a Chinese company lies or exaggerates on its own website or its Alibaba page. Here are some screenshots from the real cases of our clients:
Exaggerations on the number of employees.
But based on our investigation, this companies’ number of insured employees (legally-contracted employees should be insured according to Chinese laws) is:
Say they are factories when they are actually middlemen.
You can see in our reports that many Chinese companies’ industries are “Wholesale & Retail”, which means they are trading companies. Factories are registered in the “Manufacturing” industry.
Use registered capital to boost its financial strength instead of its paid-up capital.
You can see more about the problems with registered capital in this article in our blog:
To put it simply, registered capital is just a random number a company reports to the Chinese government when registering, but the paid-up capital is the number of money a Chinese company actually deposits into its company bank account.
What a really big company in China looks like in these aspects?
Let’s take a look at the basic information of Alibaba (China) Technology Co., Ltd.:
You can see its paid-up capital is 5.03511 billion USD, and its number of insured employees is 4031.
3. Check its lawsuits and reputation.
Why and how to check a Chinese company’s reputation:
It is extremely important that you investigate a Chinese company’s credit background. A company whose credit background is clean can not necessarily be considered a good supplier, but a company with a bad credit background can never be taken into account when choosing your possible suppliers.
In China, a company with a bad reputation usually means the one on the Official List of Dishonest Persons Subject to Enforcement (失信被执行人名单). Most companies on this list have a history of owing others money and refuse to pay it back after official judgment from courts. Some of them are included in the list because they break laws in a repeated and serious manner. The money you pay to these kinds of companies may be frozen by the government to pay back these companies’ debts.
Sometimes, you can know whether a Chinese company is on this official list of dishonest persons from the National Enterprise Credit Information Publicity System (国家企业信用信息公示平台). But sometimes the information may not be updated timely in this system, so you may need to contact us to check dishonest records of Chinese companies in national and local court databases.
A company’s lawsuits matter too. If a company is involved in a lot of legal cases about contract disputes and patent ownership infringement, it is not a good sign.
4. Check its trademarks and patents to see its strength in a certain field.
Trademarks and patents are great indicators of how a company develops in a certain field. Instead of the void words on a Chinese company’s website such as “experienced” or “strong research ability”, registered trademarks and patents are more convincing.
Also, sometimes, Chinese trading companies may pretend to be factories or other companies on their company website or Alibaba page. We can find its lies by checking the trademarks.
You can see on this company’s Alibaba page that it has a trademark – Xindy.
However, after our investigation, we found that it has only one trademark that has nothing to do with “Xindy”. And the trademark “Xindy” belongs to a factory in Zhejiang Province that is not related to this company in any way. Also, this company claims to be an experienced e-bike manufacturer, but it has no patents in this field. Thus, its research capability in this field is questionable. You can see the full story here: This Verified Supplier On Alibaba Is Pretending To Be Another Company.
5. Other aspects you should consider when verifying Chinese companies.
- Change Records
People would buy business licenses of other companies to pretend they have a long history, but the change record of representative would reveal the truth.
Also, some dishonest companies may change their names to hide. For example, it is exposed as a scammer on many English websites (try searching “Zhenjiang Zibon Electric Vehicles + scam” on Google), but it has now changed its name from 镇江智邦电动汽车有限公司 (Zhenjiang Zibon Electric Vehicles Co., Ltd.) to 江苏优路美电动汽车有限公司 (Jiangsu Youlumei Electric Vehicles Co., Ltd.). I think the company is planning to use this new name to do international business again. But the change records will never disappear.
- Violation of laws or administrative penalties
This may include records of Abnormal Operation, Serious Violation of Law, Chattel Collateral, Administrative Penalty, Illegal Taxation, Penalty for Environmental Protection, Information on Liquidation, or Announcement of Tax Arrears. Any record in these aspects should be considered as a possible risk.
Verifying the actual situation of a Chinese company is a complicated task. It includes the information gathering from multiple sources including the State Administration for Industry and Commerce of the People’s Republic of China (SAIC), the National Enterprise Credit Information Publicity System (NECIPS), China Judgements Online (CJO), National Intellectual Property Administration, PRC (NIPA), China Executive Information Disclosure Network, Databases of Municipal, Provincial and National Courts.
Also, our own increasingly-extensive database of all Chinese companies plays an important role in the verification process. If you want to know a Chinese company better, feel free to contact us.