How to monitor a Chinese supplier's financial health
Set a review calendar around supplier dependence, financial reporting and warning signs. Compare current cash evidence with delivery behaviour, investigate changes and record who can approve extra exposure or a switch. Cambridge China Bridge can support factory-side checks through its own staff in China.
Use the guidance as a reference
The government guidance addresses public-sector procurement of services and works. Use its monitoring approach as a reference for private goods purchasing, without treating its recommendations as universal private-business duties.
Start a supplier review record showing the contracting entity, production site, deposits outstanding, unfinished goods, tooling dependencies and replacement options. Procurement owns the record; finance assesses financial evidence; the buyer's authorised decision-maker approves changes in exposure. Our supply-chain risk guide covers the wider dependency review.
Set a calendar and review between dates
For its key suppliers, the guidance recommends review at least annually, with more frequent reviews for critical or riskier suppliers. For your business, agree a calendar tied to fresh financial information, production commitments and the difficulty of replacing the factory. Record the next review date and evidence due.
Bring the review forward after an unexplained demand for earlier payment, a missed production commitment, a funding change or a credible report of unpaid suppliers. Keep financial health on routine supplier meeting agendas. A calendar review should never delay investigation of a live warning.
Separate warning signs from conclusions
Ask finance to compare operating cash generation, losses, overdue receivables, unpaid creditors, borrowing availability and debt repayments with the supplier's previous position. Check whether apparent cash is available to the contracting entity rather than held elsewhere in its group. A healthy order book does not establish that materials can be paid for.
Alongside the figures, record repeated deposit requests, interrupted material deliveries, staff departures, unexplained subcontracting and declining production reliability. Treat these as investigation triggers rather than proof of insolvency. Date each observation, identify its source and ask the supplier to explain the change. Keep payment controls separate using our supplier payment guide.
Request evidence that answers the concern
Request recent management accounts, a cash-flow forecast covering your order, aged receivables and payables, and a borrowing summary showing available funds and repayment dates. Ask for supporting evidence of funding claimed as secured and an explanation of forecast assumptions. Identify the entity, reporting period, currency and preparer; obtain translations where needed.
Match the request to the warning. For missing materials, ask for purchase orders, payment status and delivery confirmations; for promised funding, ask what is committed and what remains conditional. Agree confidential handling and restricted access. If disclosure is refused, offer redacted evidence or independent review and record what remains unverified. A site visit can check activity, but cannot establish solvency.
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Choose an action and conditions for release
If the explanation is supported, retain the supplier with a dated follow-up. If concerns remain, escalate to finance and the senior buyer, agree closer reporting and require approval before increasing deposits or placing additional orders. Record the recovery action, responsible person, evidence required and review date. Distinguish decisions about new exposure from payments already due; seek advice before withholding an agreed payment or ending a contract.
If funding cannot support the order or recovery evidence fails, prepare a controlled move: reconcile goods and deposits, check tooling access, preserve specifications and assess replacement capacity. Follow our second-supplier qualification guide before approving alternative production. The buyer retains financial and commercial sign-off; Cambridge China Bridge's China staff can support agreed checks on production, materials and the supplier's explanation.
Frequently asked questions
How often should I review an existing Chinese supplier?
Agree a calendar based on dependence, fresh financial reporting and replacement difficulty. Shorten it when concerns arise, and investigate live warnings without waiting for the next scheduled review.
Does a request for a bigger deposit mean financial trouble?
It is a warning to investigate, not a conclusion. Ask what changed, request material and funding evidence, and have finance assess whether the request would increase your exposure beyond what you can accept.
What if the factory refuses to share its accounts?
Ask whether confidentiality is the obstacle. Offer restricted access, redacted supporting evidence or independent review. Record the uncertainty and require approval before accepting additional exposure.
Should I stop buying from a supplier with cash-flow problems?
Assess whether evidenced funding and a recovery plan can support your order. If concerns remain, control new exposure and prepare an alternative. Get advice before withholding payments already due or ending the contract.