3 Main Type of Suppliers in China: Factories, Trading Companies, and Sourcing Companies

We have received a lot of customer inquiries from exhibitions and websites. The most frequently asked question is: Are you a factory?

Is the factory the preferred supplier of importers?

Is the quotation of a trading company surely higher than that of a factory?

What can a sourcing company do for importers?

Let us read this article with these questions in mind.

What Is a Factory?

Uncle Nine Leather Handbag Factory View

A factory is a place where certain products or parts are produced using some kind of machine or device.

Typically, a factory always specializes in producing a certain type of product or component.

You don’t expect a handbag factory to make toys for you. Because the machinery required to produce those two products is completely different.

Factories vary in size.

A family workshop composed of three or five people can be said to be the smallest form of the factory.

A combination of 200,000 people is not necessarily a city, it may also be a huge factory, such as Shenzhen Longhua Foxconn Group.

What Is a Trading Company?

Guangzhou CBD, many companies are located in there.

A trading company is an intermediary that purchases products from factories and sells them to importers in need.

The most obvious difference between a trading company and a factory is that a trading company does not produce goods.

In China, the smallest trading company can be a one-person company, and the most famous trading company is Hong Kong Li & Fung Limited, which was established in 1906 and has about 230 offices around the world.

What Is a Souring Company?

Simple view of sourcing company office

A sourcing company, also known as a sourcing agent, refers to a company that provides services to importers in the form of commissions instead of goods, such as supplier search, price negotiation, goods inspection, etc.

Nowadays, the service scope of most sourcing companies has been extended to search, negotiation, purchase, inspection, warehousing, shipping, and so on.

This is more like a trading company.

This article only discusses pure sourcing companies that only charge commissions to importers and do not sell goods directly.

Factory VS. Trading Company VS. Sourcing Company

Now we know the 3 main types of Chinese suppliers. So, which supplier is better for importers? Factory? Trading company? Or sourcing company? Let’s compare.

To show their differences more intuitively, this article uses 1, 2, and 3 scores to represent the three levels of the low, medium, and high, respectively. The higher the number, the better for the importer.

The following are personal opinions for reference.

 FactoryTrading CompanySourcing Company
Quality Control322
Communication and Customer Service233
Technical Knowledge321
Minimum Order Quantity (MOQ)222
Dispute or protect the client’s interest223
Value Added Service132
Product Choices133

Factory scores 20, the trading company scores 22, and the sourcing company scores 21.

Why? See the explanation below.


Usually, factories can offer better prices than companies, but not absolutely. So, the factory gets a 3 score, trading/sourcing company gets a 2 score.

Quality Control (QC)

quality control, quality, qc

The factory is the actual producer, and it is easier to find and solve problems. Better than trading/sourcing companies in terms of quality control.

Communication And Customer Service

The communication skills and service capabilities of the trading/sourcing company’s employees are generally stronger than those of the factory.

Because they are the bridge between importers and producers, they exercise these abilities in their work.

Technical Knowledge

In terms of technical knowledge, factories have a natural advantage.

Although a trading company is not as good as a factory, it is better than a sourcing company.

Minimum Order Quantity (MOQ)

Now, in a buyer-dominated market, factories will also lower their MOQ to compete with trading companies, so factories and trading companies should be equal in this comparison.

Sourcing companies do not participate in MOQ, but directly ask factories. So, a sourcing company is the same as a factory in this respect.

Dispute OR Protect the Client’s Interest

The sourcing company is the representative of the importer and will resolve disputes from the position of the importer, so it gets the highest score.

As sellers, factories and trading companies have a natural confrontation with importers. They will try their best to protect the interests of both parties, rather than favoring themselves.

Because they know that the cost of maintaining an old customer is much lower than the cost of developing a new customer.

Value Added Service

In this regard, trading companies win out. Because in addition to providing products, they will also provide importers with other value-added services such as packaging design.

Although pure-sourcing companies are not as good as trading companies in this respect, they are better than factories.

Product Choices

The factory only provides products produced by itself, which is its weakness.

Trading companies and sourcing companies have no restrictions in this regard. Factories in China and around the world can make products for them, which they then supply to importers.


If they are all formally registered companies, they are safe and reliable. Do not worry.

China’s laws in this area are becoming more and more mature, and there will be nowhere for scammers to escape.

So, does this mean that trading companies are more suitable for importers than sourcing companies, and sourcing companies are more suitable for importers than factories?

Which Type of Supplier Is Right for You?

There is no standard answer to this question. In our opinion, it depends on your company.

Small Company with Niche

If you are a small company and focus on a niche market, such as selling bags, I think factories or trading companies are more suitable for you.

You just need to find some reliable suppliers. If your order quantity exceeds the factory’s MOQ, it’s better to choose a factory. If not, please choose a trading company, it will solve the MOQ problem for you.

Small Company with Multiple Products

If you are a small company and sell multiple products, such as bags, clothes, swimwear, activewear, etc., then a trading company is the best supplier for you.

No factory can provide you with all those products.

Working with multiple factories to purchase multiple products is not a good option. This means that you need a larger team to work smoothly with many suppliers.

MOQ is also a big issue for your order.

A pure sourcing company is also not a good option. After searching for suppliers, you also need to work with different suppliers for different products.

Medium Company with Niche Product

A medium company means your company has a great team and is functioning well. If focus on a niche market, a factory is your first choice. You can cooperate with factories at favorable prices and control the quality and delivery well.

Trading companies or sourcing companies are also available. Because they have many excellent cooperative factories that can fulfill your order well but may need to pay a little more.

Medium Company with Multiple Products

A medium company that specializes in multiple products is very flexible in selecting suppliers.

Whether it is a factory, a trading company, or a sourcing company, it can be its supplier.

We suggest that such importers should pay more attention to the extra value added by suppliers. This is more important than choosing a supplier.

Large Company

When a large company chooses a supplier, the first choice is a large factory, and the second is a high-value-added trading company.

Generally speaking, large companies never lack suppliers. Because many Chinese factories or trading companies are willing to cooperate with them.

What they need is how to choose the most suitable ones from the many Chinese alternative suppliers.

Where To Find Chinese Factories, Trading Companies, and Sourcing Companies?

Now we know the best options for companies of all sizes when choosing a supplier. Then, where can you find the right Chinese suppliers?

Let’s learn the below suggestions.

Old Suppliers

If you worked well with some suppliers at your previous job, now, they can also be on your list of potential suppliers for your new job. Because you trust each other, you will soon enter into a partnership.


If you have friends in China, it is a good idea to ask them to help you find suppliers. It is easier for Chinese to speak Chinese.

If you have friends who import from China or work with Chinese suppliers, ask them for advice, and your job will be easier.

If you are in the handbag business and want to import from China. Here is a guide for you. How to import handbags from China.


Going to China to participate in exhibitions is a very effective way to find suppliers, but it is not cheap.

The most famous fair in China is Canton Fair. It is held twice a year, in spring and autumn.

If you think it is necessary, pack your bags and go.

Except for Chinese exhibitions, you can also participate in world-renowned industry exhibitions. Because many Chinese suppliers will go abroad to attend exhibitions, such as in Japan, Germany, the United States, and Dubai.


Google is the largest search site in the world. You can find many Chinese supplier websites on Google.

Search and find them, then connect with them and ask for quotes, samples, and more.

For safety, a trial order is necessary before placing a large order. It would be perfect to go to China and meet your suppliers face to face.

B2B Website

Besides Google, we believe you have searched for suppliers on some B2B websites before, such as Alibaba, Made-in-China, Global Sources, etc.

Those B2B sites are useful, but not all.

Since not all Chinese suppliers have e-shops on B2B websites.

7 Tips for Easier Working with Chinese Suppliers

team, greeting, suppliers, win-win

Now, we know where to find Chinese suppliers. But how would it be easier to work with them?

Tell More About Your Company

Whether you are a small company or a large company, you should introduce more information about your company to your suppliers, such as who you are, where you are from, what is your main business and so on.

At the same time, you can also ask your supplier the same question.

If the first inquiry email is just a simple sentence “give me your price list/catalog”, it will be difficult to catch the supplier’s eyes and reply to you.

Tell Them Your Order Quantity

When inquiring, give your supplier an order quantity as much as possible. It can be a reference, but it must be true. In this way, your supplier will provide an accurate price based on your order quantity when quoting.

Please do not exaggerate your order quantity. For example, you might order 500 pieces of bags but ask your supplier to quote 5,000.

After confirming the order, your supplier found out that there were only 500 pieces, which put them off.

Know Your Product

If you want to cooperate directly with factories, then you need to spend more time to know your product.

Because factories are more willing to cooperate with importers who know the products, which makes communication is easier.

And if you know the product well, suppliers are more likely to give you better quotes.

The more professional you are, the more they will wish to cooperate with you.

List Compliance Requirements

Not all suppliers are aware of the legal and regulatory requirements of your target market (country), so when you have requirements in this regard, please list them in detail with your suppliers.

Follow Up and Reply on Time

Timely and effective follow-up, but not pushing, will make suppliers feel more humane.

Responding to supplier emails on time will help their work go smoothly.

Especially when it comes to production issues, you must not delay, because there may be dozens of workers waiting for your answer to decide whether to continue production.

Be Friends with Your Supplier

China is a country full of human touch, unlike in western countries, business is business.

Doing business with the Chinese, if you can become a good friend of your supplier, it will be very easy for your work, because the Chinese pay attention to the mutual assistance between friends, such as priority production of orders, additional discounts on prices, etc.

There is an old saying in China that if you have more friends, you will have more roads. Even if someone you worked with leaves one day, you may work together again in the future, so keep in touch with them.

Meet Your Suppliers When It Is Necessary

A phone call is worth a hundred emails. One face-to-face communication is worth a hundred phone calls.

So, do whatever it takes to meet with your suppliers. Whether it is in the supplier’s office or factory, your company, exhibition, or other third-party countries, a face-to-face conversation makes both parties feel more real and friendly and makes work easier.


Here is a summary of this article.

There are no absolute criteria for selecting a supplier. Factories are not sure of the best suppliers. Trading companies can also provide good products. The services of sourcing companies are also important and useful to importers.

What we should be pursuing is the right supplier.

Within a reasonable price range, suppliers who provide more and better-quality value-added services, whether they are factories, trading companies, or sourcing companies, can become your right suppliers.

Uncle Nine Leather is a professional handbag supplier in China, providing one-stop solution services for search, development, design, and production.

If you are working in the handbag business, welcome to contact us to establish a cooperative relationship and achieve a win-win situation.


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Uncle Nine Leather are a professional bag supplier in Guangzhou, China, providing one-stop service of design, development, search, customization and production of women’s fashion handbags, shoulder bags, waist bags, backpacks and accessories.

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