China eases Covid restrictions, vitalizing international trade. When dealing with potential Chinese partners, it is worth being vigilant, as it is easy to come across scammers and unethical practices. One wrong step, and you could lose money. We present what China scams you should pay special attention to in 2023 and how to avoid getting caught up in fraud.
China scams 2023
Fake Chinese company
The “fake company” scam comes in many forms:
1. Patent agent, law firm
On its website, such a company offers trademark/patent registration or similar services for cheap. Some scammers will send you a warning e-mail that someone is illegally trying to register your trademark or domain and will help you solve the case. The foreign company suspects nothing and pays for the service. From here, the fraud can take two directions:
- after receiving the money, the agent does not respond to messages and does not deliver on the promise. In short, you were scammed out of your money
- “law firm” or “agent” demand covering additional handling fees. Sometimes companies applying for trademark/patent registration receive fake certificates, which they may be unaware of for years.
2. Forwarder or other company in the shipping and logistics industry
Similar scammers can be found in the freight market. A company claiming to be a freight forwarder offers shipping. The customer, not suspecting anything, books the shipment and makes the goods available. Then the customer finds out that the cargo has not sailed anywhere and has disappeared. In fact, it was taken over by scammers and converted into cash.
3. Supplier, purchasing agent
When there is an increase in demand for a given product in the market, opportunists step in. There are many new offers on e-commerce marketplaces that could result in relatively high profits, but they are empty promises. Fake suppliers also choose lucrative industries, so special precautions should be taken when importing products such as, for example:
- steel
- paper
- furniture
- vehicles.
How to protect yourself from a fake company?
Do not just take the company’s word for it. Every company needs to be verified, be it a law firm, forwarder, or supplier. Do not transfer money without checking who is actually receiving it. We have seen many similar situations, and often we need to look at an offer or message to assess whether it is credible. We conduct due diligence in 48 hours. We check the scope of the company’s activities, whether there are any ongoing legal cases, and more.
Always ask for testimonials of recognized companies (there is always a risk that they were written on commission). Do not trust some random Chinese company to protect your intellectual property. We offer a comprehensive trademark and name registration service in China. You can find reliable freight forwarders for free at ShipHub.co.
Chinese fraudster companies
Another well-known scam in China is fraudsters posing as trustworthy companies. They lure into contracts with a professional website, favorable prices, and great service. They are even willing to send their business license for verification. The importer may, for example, translate such a document but will not check whether it is legally binding. In fact, such a business license may no longer be valid. Moreover, court cases may be pending against such a company; this information is not provided on the business license.
Unfortunately, the truth comes to light after placing the order. You can be scammed out of your money or be sent defective/wrong goods, such as sand in bags. Contact with the company breaks off, and there is no possibility of recovering money or returning the goods.
How to avoid being scammed?
Even if, as an importer, you receive a business license from a Chinese partner and “verify” (translate) it, it does not mean that you are dealing with an actual manufacturer/supplier. In this case, it is recommended to verify the company thoroughly. In addition to verification, quality checks should be carried out at the factory to ensure the quality of the goods and compliance with the order, as well as inspections during container loading. Carrying out an audit is a low-cost measure against possible legal problems and loss of invested money.
Changed bank account number
A new bank account number is a common practice because it does not require much effort from the scammer. Even experienced companies can fall for it. How does this scam work? For example, a long-term business partner from China sends you a message about the change of the bank account number to which you make transfers for orders. An often-used argument is “for tax reasons.” It is not uncommon for the new bank account number to be registered in a different city than the place of business or even in Hong Kong or Singapore instead of mainland China. You send the money in good faith and wait for the delivery. After some time, it turns out that the supplier has not received any transfer, so he is not obliged to complete the order. At this point, you know that you lost the wired money that ended up in the scammer’s account.
How not to be deceived?
Each e-mail or message about a data change, such as a bank account number, should be treated with extreme caution. It cannot be ruled out that someone has hacked into the business mailbox and changed the number or that you are dealing with a scammer pretending to be our supplier sending a “new” bank account number to pay to. In such situations, we recommend contacting the supplier by phone and making sure the change has happened. In addition, you should always ask for a document signed by the company’s legal representative along with the company stamp.
Find out more about the money transfer scam.
“Big Order Scam,” in other words, “come to China to sign the contract”
Those who export to China do not have it easy. The big order scam is a classic that has been around for years. Recently, it has not been practiced, as foreigners had difficulty traveling to China due to coronavirus restrictions.
The scam:
- A Chinese company contacts the exporter to place a large order, up to several million euros/dollars.
- The exporter is interested, so he is invited to China under the pretense of signing a contract.
- The foreigner in China has to bear the high costs of accommodation, notarial services, gifts (“This is how we do it”), and business dinners; some are even robbed.
- The exporter, blinded by high profit, is not discouraged and signs the contract.
- The foreigner leaves China, and the Chinese partner breaks off contact. The exporter never gets back the invested money and time.
How to avoid being scammed?
China is reopening, so in 2023 we will probably observe an increase in such unethical practices. Taking precautions is key. When a company contacts you about a potentially very lucrative deal, the first thing you need to do is verify it. Even if a potential partner runs a professional website, it does not mean the company is trustworthy. The basic measure is to check the company’s registration and license. Also, verify the person who contacts you about the matter.
Read more about the big order scam.
China scams – how to defend your interests?
- Verify business partners before establishing cooperation.
- Do not make wire transfers to people or companies that you do not know and that have not been verified.
- Do not make hasty decisions. If in doubt, do not hesitate to get in touch with us.
- If you export to China, beware of “too good to be true” orders.