How to Protect Your Business When Your Trusted Chinese Supplier Faces Operational Abnormalities

You need to investigate or conduct due diligence on it as soon as possible.

An Australian client of ours has been working with a Chinese garment supplier in Changzhou, Jiangsu Province for nearly ten years. However, since the end of 2021, he has often been       unable to contact with the Chinese supplier.

After the Australian purchaser made the down payment for a recent order, the Chinese supplier stopped responding to his messages in a timely manner.

Whether by email or WhatsApp, the Australian purchaser often has to wait for 30-60 days to hear back from its supplier, and the Chinese supplier has delayed delivery.

In fact, if you find that your suppliers or partners in China seem to be behaving abnormally, you need to hurry up for the investigation or due diligence.

Although you have worked with them for many years, and you might think that Chinese suppliers appreciate the cooperation, it does not mean that Chinese suppliers will not get into difficult business situations to the extent that they are unable to fulfill the contract.

Many Chinese suppliers are saddled with huge loans used to supplement their working capital.

Delays in sales of goods could cause the supplier to run out of working capital and be unable to repay the loans on time.

As a result, even if these suppliers would like to fulfill the contract thay have with you on time, they will not be able to so. These suppliers will not be able to operate normally, and even will have their business licenses revoked or be declared bankrupt.

The Australian purchaser hired us to investigate the supplier.

We found that the registration status of this Chinese supplier is “unable to find the Company” as shown in the company registration information. This means that the company has disappeared from its registered location, so that the company registration authority couldn’t find the company, which also means that its business license will be revoked soon.

Obviously, the company had lost the ability to fulfill the contract.

Judging from the registration date, the company registration authority had not found out the company before the Australian purchaser placed the last order with the Chinese supplier.

Had the Australian purchaser investigated the company earlier after discovering the abnormal status of the company, the down payment for the last order would not have been lost.

Therefore, it is advisable to investigate your Chinese supplier in abnormal status in a timely manner.

Photo by Jezael Melgoza on Unsplash