Why deposits get lost
The money rarely disappears because a supplier ran off in the night. It disappears because the buyer wired funds to a company that was never the factory shown on the video call, or to a personal bank account nobody checked. By the time the mismatch surfaces, the deposit sits in another province and the WeChat contact has stopped replying.
Verification is not one step. It is a short sequence of independent checks, and the strongest ones are the ones a supplier cannot fake: bank records, government filings, and a physical visit.
Step 1: Pin down the legal entity
Ask for the business license (营业执照) as a clear scan, not a photo of a computer screen. Then read it properly.
| Field | What it tells you |
|---|---|
| 统一社会信用代码 (Unified Social Credit Code) | An 18-character ID. This is the company fingerprint you use to look them up yourself. |
| 企业名称 (Company name) | Must match every contract, invoice, and bank document, character for character. |
| 法定代表人 (Legal representative) | The person with authority to sign. Check whether that is who you are actually dealing with. |
| 注册资本 (Registered capital) | Not cash in the bank, but a size signal. A quote of USD 200,000 from a company with RMB 100,000 registered capital deserves questions. |
| 成立日期 (Date of establishment) | Companies registered a few months ago asking for a large deposit follow a common pattern. |
| 经营范围 (Business scope) | Does manufacturing appear at all, or only trading and technology services? |
| 住所 (Registered address) | Compare it with the invoice address and the factory address. |
Many genuine factories export through a separate trading company. That is normal. But then the contract, invoice, and bank account should all belong to that trading company, and you should still know which factory will physically make your goods.
Step 2: The bank account test
This is where most deposit fraud is either stopped or missed.
The beneficiary name on the bank account must match the legal Chinese company name on the business license. If it does not, ask why in writing and wait for an answer that holds up.
Warning patterns worth taking seriously:
- Payment requested to an individual's personal account.
- A Hong Kong or offshore account belonging to a company with no visible link to the supplier.
- A third company name that appears only at payment time, after weeks of talking to a different one.
- Pressure to pay fast before the price changes.
There are legitimate reasons a supplier uses a Hong Kong entity — tax structure, export handling, currency. That does not remove the need to see the relationship documented and to verify both entities.
Step 3: Check the company without their help
Never rely only on the documents a supplier sends you. Run the company name and credit code through independent sources:
- 国家企业信用信息公示系统 (gsxt.gov.cn) — the official registry. Registration status, shareholders, penalties, annual report filings. A company that has filed nothing for several years is telling you something.
- 企查查 / 天眼查 (Qichacha, Tianyancha) — commercial databases that aggregate lawsuits, enforcement records, abnormal-operation listings, and changes of legal representative.
- 中国裁判文书网 (wenshu.court.gov.cn) — court judgments. Search the company name for contract disputes.
- 中国执行信息公开网 (zxgk.court.gov.cn) — the list of parties subject to enforcement. A supplier on this list is a hard stop, not a negotiation.
- China Customs enterprise credit query (credit.customs.gov.cn) — customs registration and credit rating for exporters.
Also search the supplier name alongside words like scam, refund, and complaint, in English and in Chinese. Ten minutes of searching occasionally saves a five-figure deposit.
Step 4: Verify the factory, not just the company
A registered company can be a trading office with three desks and a sample wall. You want to know whether the entity taking your money controls production.
| Method | What it proves | What it misses | Typical cost |
|---|---|---|---|
| Video walkthrough | Someone has access to a workshop | Everything off-camera, easy to stage | Free |
| Third-party audit (SGS, Bureau Veritas, TÜV, Intertek, QIMA) | Independent report on premises, equipment, capacity, staff, quality system | A snapshot only; some factories run multiple sites | USD 400–1,500 |
| In-person visit by your own or a local representative | The whole picture, including which site runs your product | Time, travel, and language support | Travel plus fee |
Whatever route you take, these are the questions that matter:
- Which address will physically produce my order?
- How many production lines exist, and how many currently run my type of product?
- Who are your main customers, and can you show recent export documents?
- Is the original business license displayed at the site? The registered address and production address should reasonably align.
An auditor who reads Chinese and speaks Mandarin catches things a translated summary never shows — a license listing a different legal representative, or a workshop that belongs to another company entirely.
Step 5: Verify the person you are talking to
The name on a WeChat account rarely matches the legal representative, and sales staff exist for a reason. What you need is a written statement of who can sign and confirm orders, on company letterhead or carrying the company chop (公章). If your contact cannot produce anything with the chop, you may be talking to an agent quoting from a factory they do not control.
Asking for two or three customer references is fair at this stage. Many small suppliers will not share names because of confidentiality agreements, but plenty will name a buyer in a market you do not compete in. Contact that reference if you can.
Step 6: Sample, then a small paid trial
Order and pay for a sample before anything else. Then place a small first order — a few hundred units, not a container — and watch how the supplier handles a real transaction: lead time, packing, document accuracy, and how they respond when something goes wrong.
A supplier who is easy at 300 units and difficult at 3,000 has shown you something useful at low cost.
Step 7: Structure payment so a bad surprise stays survivable
- Put the specification in the contract, in Chinese, with attached photos and measurements. English-only contracts create arguments about which version controls.
- Name the legal entity, the bank account, the Incoterm, the inspection standard, and the remedy for late or non-conforming goods.
- Avoid a 100% deposit. 30% deposit and 70% against a passed pre-shipment inspection is the common baseline.
- Define pass and fail for the pre-shipment inspection before the balance is due. Vague inspection clauses are worse than none.
- Consider escrow or platform protection, such as Trade Assurance on Alibaba, for a first order even if the fee stings.
- Agree on dispute resolution. CIETAC arbitration in China is standard; a named court is also common. Know which one you are accepting.
Red flags that justify pausing the payment
- Beneficiary name does not match the business license.
- No business license, or a license that cannot be verified on gsxt.gov.cn.
- The company appears on an enforcement or dishonesty list.
- Refusal of any third-party inspection, at any stage.
- A claimed factory that cannot show production equipment or let an auditor see the line.
- A sudden change of bank account, company name, or contact person right before payment.
- Prices well below market with a very short payment window.
A realistic order of operations
- Collect the business license and full bank details.
- Verify both on public registries the same day.
- Confirm the production address and whether you are dealing with a factory or a trading company.
- Order and pay for a sample.
- Commission an audit when the order value justifies it — an USD 800 audit against a USD 40,000 deposit is cheap insurance.
- Sign a Chinese-language contract with payment terms tied to inspection.
- Pay the deposit to a verified account and hold the balance until the inspection passes.
None of this requires fluent Chinese or a flight to China, but parts of it do require someone who can read the documents and stand on the factory floor. Globesino handles supplier verification, factory and pre-shipment inspections, and delivery for overseas buyers who need a local team on the ground.