Many importers we speak ask us how they can verify whether a supplier is legit. Often, this comes only after having a bad experience with a Chinese supplier. We heard many stories of importers partnering up with a supplier who eventually couldn’t deliver the product, or even worse, who paid money to a non-existing company!
My advice is to carefully do due diligence on Chinese suppliers before you engage in any business. Because, prevention is better than cure. In this article, I will explain how you can check yourself whether your supplier is a legal entity registered with the authorities, using the China Business License.
Why is it necessary to verify a China Business License?
I cannot repeat enough how important it is to always request a copy of the business license. From any Chinese company you consider doing business with. If they refuse, simply walk away.
Each business license in China is issued by a local branch of the Administration of Industry and Commerce (AIC). It is an official certificate, that proves that a Chinese company has been registered with the authorities and operates legally.
In an utopian world, the business license would assure that you are dealing with a legit supplier. Somebody who you can safely do business with. However, you can imagine that with today’s technologies, shady suppliers can easily Photoshop fake information on their digital copy. And that’s exactly what they do.
Some common forgeries are:
- Use a company name that is not registered in China
- Change date of establishment (to hide that the company was recently established)
- Increase the amount of registered capital (to suggest a stronger financial position)
- Increase the expiry date (to hide that the business license is not valid anymore)
- Add business categories to the business scope (for example ‘manufacturing’)
To [Identify a Fraudulent Supplier in China], you should always cross-check the data on the business license you receive from your supplier with the official registration record.
National Enterprise Credit Information Publicity System
As I wrote before, business registrations are handled by local branches of the AIC. These authorities upload the official registration records for companies in their jurisdiction into a national database: China’s National Enterprise Credit Information Publicity System (NECIPS).
Through NECIPS’s website, company registration records from businesses all over China can be found. Including the one of your supplier. Because the data comes from the official registration record, the information shown is nearly always accurate and reliable.
The 5-step verification process
Now it’s time to show the actual verification process using the NECIPS’s database. The two pieces of information you need to do a proper verification are your suppliers’:
- 18-digit business registration number
- Company name in Chinese (to make sure you have the record of the right company)
In the following example, I am going to show how to verify the company registration record of Tencent Technology (Shenzhen) Co. Ltd. (腾讯科技（深圳）有限公司). One of China’s biggest technology companies. Although NECIPS’s website is only available in Chinese, you don’t need to know any Chinese to be able to verify the license.
Just follow the upcoming steps:
Step 1: Go to the website of the National Enterprise Credit Information Publicity System
The first step is to navigate to the website of the NECIPS: http://www.gsxt.gov.cn
The landing page will look like this:
Step 2: Enter the 18-digit business registration number
After arriving on the website, you need to type your suppliers’ business registration number. You can find this number on the copy of the business license he sent you. In case of Tencent, the business registration number is: 9144030071526726XG
Step 3: Fix the puzzle
Before starting the search, the system will ask you to solve a simple puzzle. This could be anything from a word puzzle, marking differences between two pictures, or in our case, to drag a puzzle piece to the right spot.
Step 4: Select the search result from the list
After solving the puzzle, you will see the search results appear. There should only be one result if you typed in the correct business registration number.
As you can see in the picture below, the company that matches our number is indeed Tencent (腾讯科技（深圳）有限公司). To view all information of Tencent, we now need to click on the search result.
Step 5 – Cross-check the information with that on your supplier’s business license:
What appears now is the official registration record of Tencent. It is this information you need to cross-check with the [Information You Can Find on a China Business License].
No matter the size or business, all companies in Mainland China need to apply for a business license with the government’s Administration for Industry and Commerce (AIC). Only with this license, companies in China are able to officially register their name and operate legally.
Verifying the business license is usually the first step when doing due diligence on a Chinese company. It allows you to verify that the company is legit and not a scam. In this article I have explained how you can do this yourself in 5 simple steps.
Although very important, verifying the business license is just a basic step in doing due diligence. There are much more things you should do, which I will explain in later articles.
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