Why You Should Opt for Chinese Trading Company?

 Trading is the act of buying and selling products, or services, for the sake of profit. Therefore, it could indeed be said that a manufacturer, is also a trading company – assuming they actually sell their produce. In this article, however, the term Chinese trading company is not referring to manufacturers – but to Chinese businesses specialized in buying items from manufacturers, and selling them to overseas buyers.

That said, Chinese trading company are strictly not limited to either traders or makers. Many fall somewhere in between. In this article, we introduce you to the 5 most common types of Trading Companies in China, and what importers must know to avoid disorganized traders, and even scammers. Before you read this post, I have to emphasize that some trading companies here in China–including Hong Kong–truly create value for their customers. The problem is that the interests of trading companies are seldom aligned with those of their customers. And it takes mainly three forms:

1. Trading companies tend to work with low-grade factories
A Chinese trading company is in a delicate situation. It has to make a margin and keep its selling price competitive. And it has to ensure that its customers and its suppliers don’t start doing business directly together.

The solution is usually to work with factories that are not quite used to exporting themselves. These manufacturers typically have a low cost structure and are not properly organized. Another advantage (in the eyes of traders) is that they seldom have any English speaker on staff.

2. Trading companies seldom tell their customers about quality issues
A trading company sells products to importers. Therefore, if a foreign buyer is not satisfied about the way an order was handled, the trading company can lose money: the purchaser can ask for a discount or a shipment by air, or even cancel the project. So these intermediaries often keep their mouth shut when they know of serious issues, for fear of frightening their customer.

To make things worse, many trading companies do not do check quality at all in their subcontractor factories. Their job is match-making, communicating, and shipping. After all, if the buyer is serious about quality, he will come and check it by himself, right?

The importer should take the lead and send inspectors in the factory. When this is the case, the intermediary has a strong incentive to avoid quality issues. For maybe 3% of their shipments, trading companies that work for my clients ask me to postpone an inspection because “[their] internal QC rejected the products, and re-work is under process”. When no inspection is scheduled, they never write this to my clients!

3. Trading companies often do not have any control over the factories
A very small minority of trading companies have a stake in the factories in which they place orders, even though they generally pass themselves as the owners. They conduct friendly business (no contract, no penalties). When things go wrong they have no real power over the manufacturer, who knows that the middleman will absorb charge-backs and airfreight imposed by the importer rather than lose a customer.

Chinese trading company generally prefer to work directly with foreign buyers, who switch suppliers less easily than local traders. It means they will focus their efforts on making their overseas customers happy, and the trading companies’ orders don’t have the priority (unless they represent 40%+ of the manufacturer’s business).