Avoiding Fraud With Chinese Suppliers

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Avoiding Fraud With Chinese Suppliers

Avoiding Fraud With Chinese Suppliers

The topic of possible fraud when dealing with Chinese Suppliers in China deserves special attention.


It doesn’t mean that you will inevitably face it, but it is always better to be aware of the dangers that are out there. Businesses that are new to dealing with Chinese Suppliers and those that perform their buying or selling activities in China from a distance, without a real presence in the Chinese market, are most vulnerable to fraudulent practices.

As is the case with all countries, there are many variations of fraud found in China, however, for this article, I thought we could discuss a couple of types in two broad groups:


  • Traditional, 100% fraud (i.e. criminal activity) when a supplier has no genuine intention to doing business with you and just tries to cheat you out of your money.
  • Image improvement or manipulation of an existing Chinese supplier, done with moderately bad intentions, not solely just to cheat you.


In most situations, the frauds of the first type are very dangerous. Their only purpose is to take your money. They include cases when a Chinese supplier, which offers you its goods or services, does not exist at all, or when someone is using the name of an authentic, existing, respected company, but inserting a fake bank number or something. If such facts are not discovered at the beginning of your interaction with that supplier, you just might be on the road to ruin.

Another variation of such fraud can come when your prospective supplier in China sends you samples or prototypes of the products you want only in exchange for the up-front down payment on a larger order. You make the payment and then your full order never comes. Communications stop, and you find out that the company you hired never existed at all.

Also, there are cases when the criminals simply hack your email, tracking your communication with your real Chinese counterpart, waiting for the moment when all the details of the order are agreed upon, and the supplier sends the information for the payment. At this moment, the criminals can substitute that genuine information with a fake email, providing their own bank account details instead of those of your real supplier.

Examples of fraud more in line with the second type outlined are much more common. These can be performed by the supplier themselves or by intermediaries that pretend to be manufacturers as they know that most foreign companies prefer to buy directly from the manufacturers. In these cases, you might be shown catalogs with photos of active factories complete with smiling faces and busy production lines, all which do not exist. They may even organize a visit to “their” factory, managing to change the nameplate of a different location and staging a performance imitating a production process for you, and so on.


Some manufacturers might use photographic image enhancement techniques as well. Ultimately they want to impress you with their production capacity, modern production line, etc. When you see all of the beautiful pictures you think you are working with a top-notch business in one area of China when is a reality you may be working with a sweatshop in a totally different city. Their goal is to impress you to get the order and hold the price as high as possible and then they will plan to outsource the production o another factory or to make it by themselves but at a cheaper location with a limited capacity and outdated machinery.


In any case, it is safe to say that when working with Chinese suppliers, Diligence is the key. Exactly what types of Diligence? That is a topic for another day.




Joe Flynn is a Silicon Valley Entrepreneur who created Lavante, Inc. Lavante was started with the vision using Machine Learning, Natural Language Processing and advanced Data Extraction techniques to transform the traditionally manual-based Account Payable Recovery industry. Lavante Was acquired by PRGX Inc. in November 2017. Joe is currently working on a new venture using Artificial Intelligence and Machine learning to transform trade partner communications across the entire supply chain.