3 Quick-Fire Tips for China Supply Chain Risk Management

Most China supply chain risk management advice focuses on new suppliers: background checks, initial audits and reputation screening. That’s important, but in China, due diligence isn’t a one-off task. It’s an ongoing process, even with your most trusted, long-term partners.

With China’s exports to the U.S. plunging by more than a third in May, the steepest drop in years, many Chinese suppliers are facing real financial strain. In turbulent times like these, even your most reliable, long-term partners may be under pressure to cut corners, change ownership, or make sudden decisions that could impact your business.

That’s why, now more than ever, it’s worth taking a closer look at what’s really happening inside your supply chain. Even if you think you know your suppliers inside out, a fresh review can save you from nasty surprises.

A Cautionary Tale

Here’s a cautionary tale for anyone sourcing from China. A company had what looked like a solid, long-term relationship with a factory. They’d worked together for years, trusted the owner, and felt confident everything was under control.

But when trouble struck, the real problem surfaced: the factory owner wasn’t actually the legal representative of the company. His daughter was. In China, the legal representative is the person with the power to sign contracts, make key decisions, and — crucially — shut the business down.

When the owner ran into problems, his daughter stepped in, closed the factory, and locked up all the equipment. Suddenly, contracts were void, production stopped, and the company faced a long, expensive legal battle just to get their own machinery back.

The critical mistake? No one checked who the legal representative was on the official business license.

This kind of error happens all the time. China’s business systems are different, and when you’re busy running a company, it’s easy to overlook legal details like this.

Due diligence can easily slip, especially when you think you have a trustworthy partner.

But in China, skipping these checks can have serious consequences. Here are three quick-fire tips you can use right now to check your supply chain.

Tip 01: Check Who’s Really in Charge

Don’t assume your main contact is the boss or has the legal power to act for the company. In China, the “legal representative” is the person with the authority to sign contracts, make key decisions, and, if things go wrong, even shut the company down. If you don’t know who this is, you’re exposed to serious risk.

How to do it:

First, ask for the business license. Every legitimate Chinese company must have an official business license. The legal representative’s name (法定代表人) will be listed on it, usually on the third row down on the right side.

Second, cross-check with official records. Don’t just take a scan at face value. Use the National Enterprise Credit Information Publicity System (NECIPS) — China’s official government database — to verify the legal representative, registration number, business scope, and company status. The system is public, but it’s in Chinese, so you may need help from a local partner or a verification service.

Confirm the Chinese name. Company registration is done in Mandarin, and the official Chinese name is what matters legally. Make sure the name on the license matches what’s in the NECIPS database.

Check for red flags. If the company refuses to provide a business license, or if the details don’t match up in NECIPS, walk away. This is a major warning sign.

Tip 02: Are Your Contracts Clear? 

Speaking of contracts: Make sure all contracts are up to date. Old agreements may not reflect current business realities or changes in Chinese law, so regular reviews and updates are necessary. This includes updating terms for payment schedules, delivery timelines, quality standards and compliance requirements.

Contracts must be signed or stamped by the legal representative of the company, not just your day-to-day contact. Only the legal representative has the authority to bind the company legally, so their signature or company chop is critical for enforceability.

Tip 03: When Did You Last Visit?

Okay, this may not be a quick fix, especially if it means taking a long-haul flight, but nothing beats boots on the ground. Regular on-site visits — whether by your own team or a trusted third-party inspection service — are essential to truly understand what’s happening at your supplier’s factory.

On-site visits allow you to spot red flags that emails, phone calls, or video conferences can’t reveal. You can verify production capacity, quality control processes, working conditions, and compliance with your standards.

These visits also help you detect changes in management, ownership, or operational practices that might not be communicated otherwise.

If you can’t send your own staff regularly, hire reputable third-party inspection firms that specialize in China supply chains. They can provide detailed reports, photos, and even live video walkthroughs.

In-person visits also build stronger relationships with suppliers, showing that you are serious about quality and compliance. This can encourage better cooperation and transparency.

In Short: China Supply Chain Risk Management

• Verify Who’s in Charge: Always check the business license and confirm the legal representative.
• Keep Contracts Updated: Review contracts regularly and ensure they’re signed by the legal rep.
• Get Eyes on the Ground: Visit factories in person or use a trusted local inspection service.