Trading company: Mainland suppliers and overseas buyers
A constructed educational scenario following the documents that connect purchases, sales and payments.
The business in one sentence
A Hong Kong company buys consumer goods from manufacturers in Guangdong and sells them to distributors in Europe, invoicing in USD and paying suppliers in RMB.
This is a constructed educational scenario, not a client story. It is designed to show which documents answer which onboarding and compliance question.
Question by question
| Question | Evidence | Issued by |
|---|---|---|
| What does the company sell? | Product catalogue, sales contracts, invoices | Company / buyers |
| Who supplies it? | Supplier contracts, purchase orders, supplier invoices | Suppliers |
| How do goods move? | Bills of lading, packing lists, inspection reports | Carriers / inspectors |
| Where does money move? | Bank statements, provider reports, expected-flow note | Banks / providers / company |
| Who decides and where? | Board minutes, correspondence, staff and travel records | Company |
One order, end to end
Buyer order
A European distributor issues a purchase order in USD.
Supplier order
The Hong Kong company places a matching order with a Guangdong manufacturer, priced in RMB.
Shipment
Goods ship from Shenzhen or Guangzhou; the bill of lading names the buyer or its agent.
Collection
The buyer pays USD to the Hong Kong account against the invoice.
Supplier payment
The company converts and pays RMB to the supplier, quoting the supplier invoice.
Reconciliation
Each sale is matched to its purchase, shipment and payments for the auditor.
Questions readers ask
Why would a bank ask about the supplier’s location?
Supplier and buyer countries determine the payment corridors and risk factors the bank must understand under its due-diligence obligations.
Is a trading company’s profit automatically offshore?
No. The source of trading profits depends largely on where contracts of purchase and sale are negotiated and concluded.
Should invoices be in USD or RMB?
Use the currency agreed in each contract. Mismatches between invoice and payment currency are a common source of payment queries.
What does the auditor need?
A reconciliation that links each sale to its purchase, shipment and payments, supported by the underlying documents.
Primary references
- Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615)Checked 2026-11-12
- IRD — profits taxChecked 2026-11-12
- Inland Revenue Ordinance (Cap. 112)Checked 2026-11-12
- State Administration of Foreign ExchangeChecked 2026-11-12
- Cross-border Interbank Payment System (CIPS)Checked 2026-11-12