Sourcing agent vs your own China office

The question behind the question

Buyers usually ask this when their China spend has grown enough that the agent's cost starts to look like a salary, or when they want more control over suppliers than an agent gives them. Both are good reasons to look at it. The answer depends less on the headline cost than on how concentrated your spend is, how technical your products are, and whether you can manage people in China from the UK.

What your own office involves

A foreign company has two usual routes. A representative office is registered with the local market regulation authority and may only carry out liaison work, such as supplier contact, quality follow-up and market research; it cannot sign sales contracts, issue invoices for its own business or trade, and its local staff are normally hired through an authorised service agency. A wholly foreign-owned enterprise, which since the Foreign Investment Law took effect on 1 January 2020 is simply a limited company with foreign shareholders, can hire directly, sign contracts and invoice within its registered business scope, but it needs registered capital, a bank account, bookkeeping, tax filings and annual reporting.

Either way the running costs are the same kinds: salaries and mandatory social insurance and housing fund contributions for each employee, office rent, accounting and tax agents, travel between factories, and your own time managing the team. Get figures for your city from a local accountant before you compare them with an agent's cost, because they vary widely between cities.

Cost, control and the risks of each

An agent turns sourcing into a variable cost: you pay in proportion to what you buy, you can stop at any time, and a good agent brings a supplier network across categories you could not build yourself. The costs are less direct control, the agent's own incentives, which our agent cost guide sets out, and dependence on one outside firm.

An office gives you direct control of suppliers, specifications and quality data, and keeps know-how inside your company. Its risks are fixed cost whether orders come or not, key-person risk when a manager leaves with the supplier relationships, and the same kickback risk an agent carries, now inside your own payroll, so an office still needs audits, rotation and clear rules on supplier gifts.

When each one makes sense

An agent usually makes more sense when you buy across many product categories, when volumes are uneven or seasonal, in your first years of importing, or when you are testing China against other origins. An office starts to make sense when spend is concentrated in a few categories with steady volume, when products need ongoing engineering or quality work at the factory, and when you already have someone who can run a team in China.

Before deciding, put three numbers side by side for the next two years: what you now pay an agent in fees or margin, the full cost of the smallest team that could do the same work, and the cost of the mistakes each option would prevent. Do you need a sourcing agent? covers the first step of that decision.

Hybrid models

Many mid-size buyers end up between the two. Common arrangements are an agent for sourcing and supplier development with one employed quality inspector in China, an agent while a representative office is set up and staffed, or an agent working on an itemised or direct-import basis so the buyer knows each factory and contracts with it directly while the agent handles audits, inspections and logistics. A hybrid keeps fixed cost low while giving the control buyers were looking for.

Cambridge China Bridge works on that itemised basis for repeat and container programmes, with the factory known from the start. See our container programme service.