What Is A Trading Company?
A trading company acts as a source to supply a variety of goods to customers produced by different units. Also known as intermediaries, they act as a bridge that connects buyers and sellers. They pick products from companies and sell them to customers in their name. The rates charged by the trading companies are higher than the factory rates because it includes the various fees they incur to obtain the goods.
The trading company has rich experience in the field of import and export, so it has a good understanding of the laws and regulations of the import and export of goods.
They network with multiple manufacturing companies and deal with multiple manufacturers and suppliers to maximize sales.
In order to be a successful trading company in China, you must add hard-to-find products and factories to your product range. However, despite all the efforts these companies do to find exclusive products for you, they charge customers more than the actual company rates.
Types of China Trade Company
There are eight different types of China trade companies, including：
Sourcing company
Sourcing trading companies act as a bridge between the end customer and the manufacturer. The company purchases, monitors, inspects, and ships products to their destination. Intermediaries simplify the purchase of products by arranging high-quality products on behalf of customers.
Hong Kong Trading Companies
Hong Kong is once known as the hub of manufacturing units, but in the late ’80s, most of the manufacturing process shifted to the mainland. Even though the manufacturing units have been shifted, the trading companies have their offices in Hong Kong. Most of these companies have formed large joint manufacturing ventures that operated from Malaysia, Cambodia, Vietnam, and China.
Factory Group Trading Companies
Comparing multiple manufacturing units producing various types of products, factory group trading companies provide quality and variety. Different Chinese companies joined together to form a single large manufacturing unit to simplify invoicing and export procedures in the form of this business setup.
Combined Manufacturer And Trading Company
In this trading setup, the company undertakes the production control and produces the goods, and then supplies them to the end customer. The trading company utilizes its own resources to produce the goods and handle the trading.
A Certain-filed Trading Company
Trading companies do offer competitive prices as compared to manufacturing units. In the certain-filed trading company set up, the company prefers a specific niche and focuses its entire efforts there. The company chose a team of trained, professional, and experienced individuals and offered competitive pricing to the clients.
Grocery-type Trading Company
Trading companies do offer competitive prices compared to manufacturing units. In setting up a trading company in a specific field, the company prefers a specific niche market and focuses its entire energy in that field. The company has selected a well-trained, professional, and experienced team and offers customers competitive prices.
Hot-selling Type Trading Company
As the name suggests, such a trading company has a strong interest in the hot products in the market. The company first identifies products through in-depth market and trend research and then arranges manufacturing cells. They make quick money by selling products that are more in demand in the market because as demand falls, they quickly switch to another product.
Soho China Trade Company
It is an abbreviation of a small office or small home, where a trading company initiates the business practice with a minimum number of people. For starting a Soho company, you need first to register your company and make an account at Alibaba and voila.
Tips You Should Know When Working With China Trading Company
China Trading Companies Tend To Work With Low-Grade Factories
Chinese trading companies often operate in a delicate environment. It has to maintain profit margins, sell more, and keep its sales prices competitive. It must also ensure that its customers and suppliers do not start working together directly. The solution is usually to work with factories that are not used to exporting their own products.
The owners of these factories often have low-cost structures and are not properly organized. Another advantage (from a trader’s point of view) is that they have few English-speaking employees.
Chinese Trading Companies Seldom Tell Their Customers About Quality Issues
Chinese trading companies sell to importers and foreign companies. As a result, if foreign buyers are unhappy with the handling of orders, trading companies may lose money: buyers can ask for discounts or air freight, and even cancel orders. As a result, these intermediaries tend to remain silent when they learn of serious problems so as not to frighten clients.
Worse, many trading companies simply do not check the quality of their subcontracted factories. Their job is to match, communicate and transport. After all, if buyers are serious about quality control, they will come and check it out for themselves, right?
China Trading Companies Often Do Not Have Any Control Over The Factories
Few trading companies have a stake in the factories where they place their orders. Although they usually have themselves as the owner. They do business amicably (no contracts, no fines). When things go wrong, they have no real power over manufacturers, and who knows if middlemen will absorb the chargebacks and air shipments charged by importers rather than lose customers. Factories generally prefer to work directly with foreign buyers because they have export licenses.
These buyers are less likely to switch suppliers than local traders. This means they will focus on satisfying overseas customers, and trading companies will not have priority orders (unless they account for more than 40% of manufacturers’ business).
Steps to Open Trading Company in China
Suppose you are considering setting up a trading company in China. In this case, you may be referring to a business setup executed by the company to handle sales, purchases, and other business activities.
To start a trading business in China, you must understand the rules and regulations of opening a trading company. To be allowed to do business in China, you need to meet two conditions.
Document preparation: Documents are an essential ingredient of setting up a new business in China, and if you complete all the paperwork requirements, you can initiate your business at any time.
Trading companies can be approved for domestic trade, international trade, and specific after-sales services.
Condition One
In order to register, the authorities requested the following information, including:
Corporate structure: For a corporate setup, you have to mention the shareholders, supervisors, and legal representatives. Supervisors and legal representatives must be individuals, and shareholders may be individuals or registered companies resident in other countries.
Business Registration Information: The new trading company is also required to provide information on shareholders, registered capital, equity, business activities, official address, accounting, and secretary.
Condition Two
For verification purposes, you may require the following documents, including:
- Provide authentic identity documents and submit the same information to the administrative department for industry and commerce.
- In order to verify identity, the authorities requested documents, including notarized files of supervisors, legal representatives and shareholders.
- Once you have submitted the legal documents for identification and verification of their authenticity, further procedures can be easily initiated.
Process of Opening a Chinese Trade Company
There is a slight difference between the establishment of trading enterprises and the establishment of services industries. At the same time as applying for international trade business, we also need to go through the qualification examination and approval of foreign trade license.
We have taken four steps through which you can set up a trading company in China.
Step 1. Business Registration Application
- Approval for the name of a trading company in English and Chinese
- Identification of documentation requirements
- Application for business license and seal
- Obtain a certificate of registration of a foreign corporation
Step 2. Opening of Bank Account
- Determine the veracity and legitimacy of the corporation while submitting the form
- Check the authenticity of the licensed file and the legal representative
- Obtain corporation bank details
Step 3. Tax Registration and Vat
- Registration of the corporate taxpayer
- Publishing the tax system and vat invoices
- Obtain the general qualification for the taxpayer
Step 4. Customs Registration
- Certificate of registration issued by the customs
- Obtaining the business certificate for international trading
- License and permits of import and export
- Electronic port ic cards and system
Final thoughts
That’s all there is to know about finding a genuine trading company in China. Trading companies are a bridge between factories and buyers. They usually have a good understanding of the Chinese market.
If you have a good understanding of China’s manufacturing and trading sectors, it becomes very simple. We should stick to a single trading entity and establish long-term working relationships.
In China, many companies have exclusive discounts, as well as offers for regular buyers. You can also choose one reliable China trading company from the eight options mentioned above.
Finally, it will help you import products at a reasonable price. Happy trading!
