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Is it safe to send payments to a Hong Kong company for China productions?

by Renaud Anjoran

Many small importers wonder if sending money to a Hong Kong company is safe.

This article will be structured as an FAQ (Frequently Asked Questions) page. I tried to give a clear picture of how HK companies should be viewed by buyers.

Q: How can we know if our supplier’s company is in China or in Hong Kong?

Do not just look at the address in their signature. Ask for a copy of their business registration. If it is all in Chinese, it looks like they are registered in mainland China.

Q: This supplier’s company name is Hongkongese, and their bank account is in Hong Kong, but the address they give me is in China. How is this possible? Is this a red flag?

A: The most important is to make sure you are wiring money to a company account. Not a personal account.

Many companies have 100% of their operations in China, but receive payment on the bank account of their company in Hong Kong. That is not necessarily a sign of dishonesty.

That is why you might come in contact with suppliers who use a Hong Kong company name and a Chinese office address. Weird but very common, and not a red flag in itself.

Q: Why would a supplier sell to us via a Hong Kong company, if production is in China?

A: Many manufacturers set up a branch in Hong Kong, for many reasons (tax evasion, but also to have a showroom to welcome customers, to hire key R&D engineers who would not live in the mainland, and so on).

And most of the HK-based exporters are trading companies. It is difficult to write about them as a whole — some add a lot of value, while others are truly bad apples.

Q: How can I know whether that HK company even has a real office, or if they use their accountant’s or lawyer’s business address?

A: Many HK-based traders have no real office. It is literally 2 guys in an apartment!

A good way to spot them is to ask for a meeting in their office, and see the reaction. Another way is to search their address on Google, and see if many other companies are also listed in that same address.

By the way, some small offices in Hong Kong are very inexpensive. Do not think renting an office is the sign of a “real” company.

Q: If I wire money to a Hong Kong account but the company only has assets in China, is this a strategy to scam buyers and give them no way to collect their money back?

A: It is not a clear sign of dishonesty. But this is a good question.

If you have a contract that is enforceable in China, signed and chopped by a Chinese supplier that has assets in the mainland, and if you send money directly to that supplier’s bank account in China, you are in a good position to apply pressure if things do not go as per your contract.

If you send money on a Hong Kong company’s account, though, suing the Chinese supplier becomes less realistic.

Consult a lawyer on these matters… I am not a specialist in OEM agreements.

Q: Do most scammers use Hong Kong companies?

It does not seem to be the case, based on what their victims have told me. Most scammers are based in the mainland.

(But there are so many more companies in the mainland… I am not saying the proportion of scammers is higher in the mainland).

Q: A HK supplier pretends to own a factory in Shenzhen. How can I check this?

On the surface this is hard to check. But not if they tell you the company name and address of the Chinese factory.

With that information, you can run a background check on that Chinese factory… And see if that HK company is one of its shareholders. This information is available!

For more information on these topics, I recommend to read these 2 articles:

Background checks on Hong Kong companies

6 tips for background checks on Chinese suppliers


Renaud Anjoran has been managing his quality assurance agency (Sofeast Ltd) since 2006. In addition, a passion for improving the way people work has pushed him to launch a consultancy to improve factories and a web application to manage the purchasing process. He writes advice for importers on qualityinspection.org.

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0#Nathar Leichoz2014-06-06 10:17
A China factory using their own Hong Kong company to receive orders and payment is not illogical and has its advantages.

1. If foreign money is wired into China, it is converted into RMB and CANNOT be converted back to foreign currency easily. (Foreign currency is horded by the government.) Sometimes factories need to maintain foreign currency to buy raw materials from other countries. So receiving funds in Hong Kong allows flexibility in converting the currency and wiring money in/out.

2. Many China factories receive orders from HK. If the factory chooses to receive the order via their HK company, the deal essentially becomes a HK deal and if anything goes sour, the factory can sue the buyer in HK without involving cross border laws.

3. Money received in HK is taxed based on profits. Money received in China (depending on your company type) might be taxed based on revenue, even if your factory is making a loss.
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