How to Avoid Being Scammed When source from China?

From time to time, we receive inquiries from clients seeking help in recovering their funds. More often than not, these clients have fallen victim to scams where suppliers disappear after receiving deposits. Some clients receive products with significant shortages, while others receive inferior quality products that are worthless. So how do you avoid being scammed?

The most critical step is to ensure that you are dealing with a registered Chinese company. Sadly, many companies claiming to be Chinese companies are not registered with Chinese corporate authorities ( Administration for Market Regulation ). The information they provide on e-commerce platforms, websites, email addresses, or business cards may be false, designed to deceive unsuspecting buyers.

1. Check the business license

To verify that you are dealing with a legitimate Chinese company, request a copy of their business license and have someone who speaks Chinese and understands Chinese business licenses examine it ( You may check our previous post to know more about it: What Can We Learn from the Business License?) Look for information on the license such as the year the company was formed, its location, and the scope of its business. Of course, you can always approach us anytime to check that and provide you a basic due diligence report.

Another way to verify their authenticity is to ask them to provide the information and compare it with the information you found yourself. Any inconsistencies in the provided information are a red flag, and you should walk away.

2. How about a Hong Kong company?

Another issue we would like to address is the prevalence of shell companies registered in Hong Kong. Before China’s opening-up policy, many Hong Kong-registered companies were legitimate trading companies that sold products purchased from mainland China. After the opening-up of China, some Chinese factories opted to open Hong Kong companies to sell their products directly to overseas markets. However, many Hong Kong companies are incorporated with malicious intent, specifically to defraud buyers.

If you are aware of the Hong Kong company’s history, that’s fine.

However, if the Hong Kong company is opened by a factory located in mainland China, we highly recommend that you sign the contract directly with the factory. This is because even if the business is legitimate, the Hong Kong company typically has no assets. As a result, even if you win a case, you cannot enforce the judgment. Instead, sign the contract directly with the factory, specifying that the jurisdiction is in mainland China and that the applicable law is the law of the People’s Republic of China.

If you are unsure of the identity of a Hong Kong company, it’s best to walk away. It’s better to be safe than sorry.