How Can You Tell the Difference between Real and Fake Chinese Suppliers?

How can you tell if a Chinese supplier is pretending to be another Chinese company to sign a contract with you?

One of our clients in Mexico met a Chinese supplier in Changzhou, Jiangsu Province, at a trade fair.

The Mexican company conducted a business survey on the Chinese supplier and learned that its business reputation was sound.

Hence, it signed a purchasing contract with this Chinese supplier worth nearly 250 thousand dollars and paid 50 thousand dollars in advance.

Since the Chinese supplier had delayed delivery, the Mexican company, after realizing the possible risk, entrusted us to urge the supplier to deliver .

We immediately contacted the Chinese supplier, but they said they had never concluded a contract or done business with this Mexican company.

So we reviewed the transaction document between the Mexican company and the seller and found the following doubtful points.

i. The seal of the Chinese supplier stamped by the seller on the contract and order does not conform to the generic seal style of Chinese companies. Therefore, this seal should not be the official seal of the Chinese supplier.

ii. The seller uses Hotmail to communicate instead of the Chinese supplier’s company email .

iii. The English name in the seller’s bank account is not the English name registered with the Ministry of Commerce of China by the Chinese supplier.

As a result, we believe that this seller may have impersonated the Chinese supplier and entered into a contract with the Mexican company in its name.

At this point, we cannot find out the real identity of this seller, nor can we file a claim against them.

So how can we avoid this situation? You should conclude a contract with a Chinese company in the following way.

1. Stamping with the seal is the most common way for Chinese companies to conclude a contract.

In China, the official company seal is a symbol of corporate power. Anything stamped with the official company seal is considered to be on behalf of the company’s will.

The person who has the right to use the official company seal is the actual controller of the company. If the person who negotiates with you on behalf of a Chinese company can’t get the controller of the company to stamp the contract with the official company seal, then he/she is highly unlikely to represent the company.

So, if you’re going to do business with a Chinese company, the contract has to be stamped with the official company seal. In this way, the Chinese court and law enforcement authorities will recognize that the contract is concluded by the said company.

2. Asking for the business license of this company

Every legally registered Chinese company will have a business license issued by the Chinese company registration authority, and the administration for market regulation.

If the company cannot show its business license, it is definitely not a legit company.

Depending on the company size, the business license may be issued by a local administration of market regulation or by the State Administration of Market Regulation (SAMR).

The information on the business license includes the company’s legal name in Chinese, unified social credit number (just as the company’s ID number), registered capital, company type, legal representative, date of incorporation, expiration date, and business scope. On the bottom right corner, there is a red stamp of the company registration authority.