Does Your Supplier Suffer From A Status Of China Abnormal Business Operations?
Sourcing from a Chinese supplier is probably every international company’s dream because of the availability of cheap labour and low production cost. However, before starting off a deal with them, have you ever checked their ‘abnormal business operations’ status? Now many of you might not be aware of this phrase or what causes it, hence this write-up.
As is evident from the name itself, this kind of a status applies to companies suffering from financial instabilities. However, to know more about it, let’s dig in deeper, and check what it is all about.
China Abnormal Business Operations — Meaning & Its Origin
Abnormal business operations are a status given by Administration of Industry and Commerce (AIC), to companies suffering from irregularities in processes. However, it goes not on a company but on its registration record, so that they are compelled to fulfil their reporting obligations in time.
Regarding the origin of the term, it dates back to 2014, when the “Interim Procedures of Business Abnormal Operation Directory Management” as an order 68 was published by AIC.
China Abnormal Business Operations— Four Categories
The status is deemed to fit those Chinese companies, which go through the following circumstances—
1. Neglect submission of an annual return on a timely basis
The information on business performance requires sharing and those, who fail to comply with it, suffer from the status of an ‘abnormal business operations’. Although Chinese companies are given time until June 30 to share their reports on annual return, many of them fail to do so, inviting this status upon themselves. By far, this is the most common type occurring throughout China.
2. Fail to report other information on a timely basis
Here ‘other information’ pertains to shareholder transfers and registered capital contributions, which Chinese companies are expected to report within 20 working days. Those that fail to commit the same within the deadline, automatically suffer from this status.
3. Involved in falsification
AIC discourages falsification, hence the ones that are caught in the same act, or try to conceal facts, end up earning the status of ‘abnormal business operations’. Therefore, to enjoy a better reputation, Chinese companies should always share their financial information with AIC.
4. The organisation is not available, rather can’t be tracked down by AIC
In situations when an enterprise changes office location making it difficult for AIC to track them down, the case of ‘abnormal business operations’ evolves. Although such circumstances are rare, AIC never forgives such Chinese companies, thereby altering their status with immediate effect.
As mentioned in the introductory lines, such status definitely hampers reputation. As a result, offshore businesses lose confidence in Chinese suppliers. Even though such state of affairs is sometimes an effect of an unfortunate incident, the chances of that supplier enterprise encountering certain serious problems are high.
Beware! The supplier you are seeking might be one of them! However, with consulting firms like Sinis operating from Ireland, spotting such an ill-reputed supplier and verifying their reports has never been simpler. So run a check before sourcing your supplies from such an organisation.