Bankruptcies of Chinese factories

China has returned to work after coronavirus restrictions were eased. Factories operate as usual and fulfill importers’ orders. However, not all companies managed to survive the hard period of downtime caused by the epidemic. In this regard, we want you to pay attention to the increased bankruptcies of Chinese factories. Half a million companies have already been closed. Be careful when cooperating with Chinese factories, and remember to verify them.

When verifying Chinese companies, we deal with all sorts of scams on their part. Known examples include Big Order Scam or the Bank Account Switch. In addition, we have recently been observing a wave of scams related to medical and PPE products from China. False certificates are common; dishonest suppliers disappear after prepayment, or a company offering products simply does not exist.

However, we always emphasize that importers should not only check new suppliers with whom they have not yet established cooperation. You should also verify your current partners. Risk in doing business with China is not only related to the frauds that we describe. You must also remember that the Chinese economy is largely based on the free market, and every year hundreds of thousands of Chinese companies and factories go bankrupt. After the tough period of the coronavirus epidemic in China, this number will be even more significant as many factories just can’t get back to work. Many enterprises have not been able to survive the epidemic and quarantine stagnation.

Bankruptcies of Chinese factories after coronavirus

According to official information, as many as 460,000 Chinese companies were closed in China in the first quarter. When the epidemiological situation completely stabilizes, we can expect a further increase in this number. Many companies are already on the verge of bankruptcy, only they have not yet declared bankruptcy.

Unfortunately, the bankruptcies of Chinese factories may also cause some fraud on their part. Expecting it to close, business owners in China can take advantage of the last opportunity to make deals and earn money for a commodity that they never actually ship. The requirement for an advance payment from a Chinese factory is perfectly normal. For this reason, a supplier who knows that he is closing the factory can take an advance payment, do no work and simply do not deliver the goods. If scammers successfully implement such a scheme with a large number of foreign companies, they collect a substantial sum. This type of scam is difficult to detect and therefore works.

We know that many importers who have long cooperated with one partner are not vigilant. However, even if you have been working with one company for many years, this does not mean that everything is OK at present and that you will not come across problems with this supplier. Therefore, we recommend that you verify such a company and see if it is in bankruptcy or reorganization proceedings. Contact us to verify your supplier.