A factory makes the goods, a trading company buys and resells them, and a sourcing agent china buyers hire works on your side for a fee or commission. None of the three is automatically right. Choose by what your order actually needs: a single category in real volume usually goes direct to the manufacturer, while a mixed basket, a very small quantity or a buyer with no quality control capacity is often better served by an intermediary.
The three things people mean by supplier
Buyers use one word for three different businesses, and most of the confusion here comes from that. A factory owns the machines and employs the people who make your product. It carries the tooling, the process knowledge and the capacity constraint. A trading company buys finished goods from factories and resells them to you under its own contract, taking ownership and margin. A sourcing agent, china buying agent or china purchasing agent is engaged by you, is paid a fee or a percentage, and is supposed to represent your interests rather than sell you its own stock.
The US International Trade Administration, in its Country Commercial Guide chapter on China, describes trading companies as firms that "Act as intermediaries buying goods in large quantities to resell to retailers", sales agents as parties who "Earn a commission for selling U.S. products", and distributors as those who "Take ownership of the goods, then market and service the products". That guide is written for US exporters selling into China, not for importers buying from China, so use it for the definitions of the intermediary roles and not as import advice.
Those definitions tell you where the money and the accountability sit. If the counterparty takes ownership, its interest is its own margin. If it earns a commission on your spend, its interest moves with your spend. Neither is dishonest, and both are worth knowing before you negotiate. This page sits under our wider guide on how to source kitchenware from China and covers only the choice of who you buy through.
Where we are writing from
We are a factory in Yangjiang. We make kitchen tools, utensils, knives, serving and tabletop pieces and barware, and we sell OEM, ODM and private label production to brands and retailers. That gives us an obvious interest in buyers going direct, and you should read the rest of this page with that in mind.
It also gives us a view most writing on this topic lacks, because almost everything published about choosing between a factory, a trading company and a chinese sourcing agent is published by agents. We see the other end: the enquiries that arrive through intermediaries, the specifications rewritten twice before they reach the floor, and the orders we decline because the item is not ours to make. So this page includes a section on when an intermediary is the better answer, and a named list of what we would not quote.
How to tell a factory from a trading company
How do I tell if a supplier is a factory or a trading company?
You cannot tell from a website, a catalogue or a tour of a showroom. Showrooms are cheap to build and many are shared. What separates the two is process detail and paperwork, and both can be checked before you place an order.
The most reliable test is depth of answer about your specific part. Ask what the blanking tonnage is for that handle, how many polishing stations the line runs, what the reject rate was on the last similar run, and what happens to a lot that fails plating adhesion. A factory answers from memory or walks to the floor and finds out. A reseller returns a fluent answer that does not change when you ask the follow-up.
How do I check a Chinese company's business licence and business scope?
Every mainland Chinese company has a business licence carrying a Unified Social Credit Code, an 18 character identifier, and a registered business scope. The scope is the field that matters. If it lists only trade or wholesale terms and nothing in the manufacturing family, 生产, 制造 or 加工, the entity is registered to trade, not to make. That is not disqualifying, but it means this is not the factory.
Ask for a scan of the licence, then run the checks below in order. The national registry at gsxt.gov.cn is where a licence is verified, though access is gated and you may need someone in China to pull the record.
- Read the registered business scope and confirm it covers manufacturing, not only trade.
- Match the Unified Social Credit Code and the company name on the licence to the entity that issued your quotation.
- Match that same name to the bank account you are asked to pay. A mismatch is a stop, not a query.
- Check the export entity name on the customs declaration against the quoting entity. Many factories legitimately export through an agent, but know that before shipment rather than discover it on your documents.
- Ask for a live video walk of the machine and station that make your part, in production, with the operator present. Not a showroom, not a stock video, not an edited tour.
- Ask who owns the tooling and who holds the test reports for your product.
The video walk sorts most cases in ten minutes. Ask for the press running your blank, then ask whoever holds the camera to turn it to the job card and read the quantity out. A genuine factory finds the request unremarkable.
Does a platform verified-supplier badge prove a company is a factory?
No. Verified and gold badges on supplier directories are paid membership tiers with a third party check attached. That check confirms the company exists, that its registration documents are real and, sometimes, that an inspector visited an address. It does not establish that the company operates a production line for your product, that it owns the tooling, or that your item will be made there. Use directories to build a candidate list, then verify with the licence, the scope and the video walk. A badge is an entry criterion, never a conclusion.
What an intermediary costs, and whether direct is cheaper
What does a china sourcing agent charge?
Sourcing agent fees are usually structured in one of three ways, and it is worth asking which applies before any supplier names are shared. A commission on order value is the most common. A flat retainer is the second. A hidden margin, where the agent quotes a price and keeps the difference against what the factory charged, is the third, and it is the one that causes disputes.
Swipe or scroll the table to compare all columns.
| Model | How you pay | What to ask |
|---|---|---|
| Commission on order value | A percentage added to or taken from the order | Is the factory price disclosed to me in writing? |
| Flat retainer | A fixed fee per month or per project | What is included, and what is billed separately? |
| Undisclosed margin | A single all-in price with no breakdown | Who is the manufacturer, and what did they invoice? |
| Trading company resale | One invoice, one counterparty, margin inside it | Who makes it, and who is liable if it is wrong? |
None of these is wrong in itself, and a disclosed commission for real work is a fair trade. Refuse a structure where you cannot see whether the agent is paid by you, by the factory, or by both. Ask whether the agent receives any payment or rebate from the supplier side, and get the answer in writing.
Is it cheaper to buy direct from a manufacturer?
On unit price, usually yes, because one margin has been removed. On landed cost over a year, not always. Going direct moves work onto you that someone else was doing: specification writing, sample rounds, quality control, documentation, consolidation and the awkward conversation when a lot is marginal. If you have a person who can do that, direct is cheaper and faster, because there is no translation layer between your question and the machine. If you do not, the saving is often spent on a failure you did not catch.
There is a volume threshold too. Most factories have a minimum order quantity per item and per finish. Below it, a trading company aggregating your order with others will beat any direct quotation you can obtain, because it is buying at a tier you cannot reach alone.
Four cases where we would send you elsewhere
When is a trading company or agent the better choice?
There are four situations where we would tell a buyer to use an intermediary, and we say so fairly often. The first is a multi-category basket. If your range is knives, utensils, a stockpot, a set of flatware and a countertop appliance, no single factory in China makes all of that, and anyone who says otherwise is reselling most of it. Five categories direct means five contracts, five inspections and five shipments to coordinate, and a trading company doing that consolidation is earning its margin.
The second is very low volume. If you need two hundred pieces to test a market you are below most factory minimums, and the factories that will take the order are often the ones with nothing better to do. An agent who can place a small order inside someone else's production run will serve you better.
The third is no quality control capacity and nobody who can travel. Direct sourcing assumes somebody on your side can read a specification, judge a sample and go to the floor when a lot is marginal. If your team is two people and neither can fly to Guangdong, an intermediary with people on the ground is buying you something real. The fourth is consolidation across suppliers: one container, one set of documents, one invoice, goods from six factories. That is logistics and administration work, and worth paying for if you are not set up to do it.
What buying through an intermediary does not change
This is the part most often missed, and the one with legal weight. Putting an agent or a trading company between you and the factory does not move product responsibility away from your brand.
Under Article 13(1) of the EU General Product Safety Regulation, Regulation (EU) 2023/988, "A natural or legal person shall be deemed to be a manufacturer for the purposes of this Regulation and shall be subject to the obligations of the manufacturer set out in Article 9 where that natural or legal person places a product on the market under the natural or legal person's name or trademark." The regulation applies from 13 December 2024 and this is EU law, so it governs goods placed on the EU market, not the US, UK, Australian or Canadian positions, which have their own regimes.
Carry the principle across markets: if your name or trademark is on the product, you hold the manufacturer's obligations regardless of how many parties sit between you and the production line. That is why our OEM, ODM and private label guide treats documentation as part of the specification. In practice you need to trace the actual manufacturer, hold the test reports in your own name, and reach the production site when a complaint arrives. An intermediary can satisfy all three, but only if you wrote it into the contract at the start.
Who owns the tooling if I pay for it through an agent?
Whoever the tooling contract names, which is frequently not you, and this is the most expensive thing buyers discover late. When you pay a tooling charge through an intermediary, the money reaches a factory and a mould gets cut. If that agreement sits between the agent and the factory, and your contract is only with the agent, your leverage over the mould runs through a party you may one day want to leave. Buyers who change intermediary sometimes find the factory has no instruction, and no obligation, to release it.
Fix it in writing before the tooling is paid for. State who owns the mould, where it is stored, which entity holds it, and what happens on termination. Ask the same about test reports, because a report issued in the agent's name is one you may lose access to.
The International Trade Administration guide warns in the same chapter that "selecting an unreliable local distributor could result in issues ranging from intellectual property theft to unfavorable sales and marketing terms". That is written about distribution into China rather than sourcing out of it, but it names the same exposure a badly drafted tooling and design arrangement creates in the other direction.
What a factory sees that a buyer does not
Specifications lose detail at every hop. A brief that passes through an intermediary arrives at the floor shorter than it left, and what falls off is what a non-technical party judged unimportant: a surface finish note, an edge radius, a tolerance on a handle fit. We often quote against a brief and later learn the buyer had asked for something it never mentioned.
Price pressure arrives without context. When a number comes down a chain we are told the target and not the reason. A buyer telling us directly that a retail price point is fixed lets us propose a material or process change that holds the margin. The same request relayed as "reduce ten per cent" usually gets a thinner gauge, which nobody wanted.
Sample rounds multiply too, because every approval through an extra party adds days. The fastest programmes we run are the ones where the person deciding is in the same conversation as the person grinding. You can see the buyers we work well with on our who we work with page.
Running the decision
Decide on the shape of the order, not on principle. One category in volume, with someone on your side who can judge a sample, goes direct. A mixed basket, a first small test or a team with no technical capacity goes through an intermediary, chosen carefully and paid transparently.
Whichever you pick, send the same brief. One identical document to every candidate, factory or agent, is what makes the replies comparable, and our kitchenware RFQ template sets out the fields a factory needs in order to quote rather than guess. Keep verification separate from the relationship: checking a licence, a scope and a bank account is ordinary commercial practice, a good supplier expects it, and the ones who resist are telling you something.
Your checklist
- Established whether the counterparty is a factory, a trading company or an agent
- Business licence read and the registered scope confirmed to cover manufacturing
- Unified Social Credit Code and company name matched to the quoting entity
- Bank account name matched to the licence name
- Export entity name checked against the quoting entity
- Live video walk of the machine and station making your part, not a showroom
- Fee structure disclosed in writing, including any supplier-side rebate
- Tooling ownership, storage location and release terms agreed before payment
- Test reports and certificates issued in a name you retain access to
- Product responsibility understood to stay with the brand on the label
- One identical brief sent to every candidate for comparison