By cutting out the traditional agents and middlemen, it gets savings of between 20% and 30% and passes these on to shoppers.
Luggage has been its first big success 6,000 pull-along cases, priced at between £9.99 and £14.99 sold out, and more suitcases are on their way, along with 100,000 cool bags, picture frames, desk tidiers and a handful of Christmas products. Canned mandarins and tomatoes have also been bought this way.
The Co-operative Group asks the federation for a particular product and gives it a target price.
It then sends the details to all the relevant Chinese factories and filters the bids back to Manchester where the non-food team decides which factory to pick.
But the process has taken some time to nurture and fine-tune, as Malcolm Hepworth, retail controller of the Co-operative Group, explains: "When we first went to Canton two years ago and toured factories in southern China, I wasn't happy about the standard of some of them, and some of the first samples also weren't up to standard."
However, before any deals are struck, the factories are checked against the Co-op's code of conduct, and labour standards and practices are monitored.
Long shipping times mean only food such as canned fruit can be imported, and David Croft, head of quality and consumer care, says this is checked carefully for pesticide use. "The only food safety issues we have is that some of the technology isn't what we would use in the UK, but it doesn't make it unsafe. "You just have to look at it from a different perspective. We are treading carefully but are encouraged by what we've seen."
Even though there is no problem with health and safety, Croft says his team will continue to push the factories further in future.
And although the society is confident there are no children being employed, staff working very long hours is an issue something the group is trying to reduce by suggesting more efficient working practices.
Plus, China currently does not recognise trade unions something the Co-operative Group is keen to change.
But Croft stresses the federation has allowed it to have a level of dialogue it could not have had with individual factories.
And it has also facilitated improvements the Co-operative Group has requested. "We use native Chinese speakers to talk with the workers to get them on board with ethical trade."
Unsurprisingly, none of the Manchester team speaks Mandarin, so a native speaking student was employed. He is now off to live in Shanghai, where he will help with translating and checking on quality assurance. However, ethical trade is not a readily understood concept, and Croft admits trying to find ways of explaining it has been a challenge.
Suppliers are regularly bought together for collective training in UK standards, but he admits this will take time. "We want to push them to do more, such as accept freedom of association. But these changes will be incremental."
Even now, Hepworth is not convinced that the set-up is watertight. "We are petrified of making a mistake," he admits.
Prior to the agreement, the Co-operative Group had been buying from bigger Chinese firms using agents in the UK. Hepworth insists that he is not bypassing British manufacturers in favour of their Chinese counterparts. "We have just cut out the middle man who was making a healthy margin."
But, in keeping with the group's philanthrophic outlook, he believes that by using small companies, it can help improve workers' lives.
Although prices are much cheaper this way, Hepworth acknowledges that the Co-op must be whiter than white.
"We don't want to sell cheap products making great margins if they have been produced using cheap labour. I will not sell a product that has been built on the back of someone's suffering."
The society is also pushing for better design and innovation. Says head of buying non-food in food stores, Simon Musther: "It is not to the same standard as with European companies but I am sure that will change over time."
He is excited by the possibilities, but also aware of the risks involved and the drawbacks such as a much greater timescale.
"You have to accept it is a long lead time. I saw a picnic blanket that I wanted last October, and it is coming in April.
"Shipping time is four weeks, so you are looking at a total of between six and nine months. But I think that will get quicker as we go along."
Another issue is payment. Currently the time-consuming and antiquated letter of contract is used to ensure the Co-operative Group gets its order, but Musther hopes a more traditional invoicing system can be set up as stronger relationships are forged. "We did not want to set up a whole importing department until we knew how successful it would be."
Although the percentages of non-food sourced from China are currently small, the group hopes to beef it up.
By the end of the year, 100% of the luggage for market town stores will be bought this way and 15% of the Christmas decorations.
Hepworth says the set-up helps it compete with its immediate competitors such as Somerfield and acknowledges that non-food helps compensate for low margins on food.
He is off for another visit to China later this year and plans to sign a further memo of understanding with the Chinese federation when the current one expires.
Like his colleagues, Hepworth is genuinely enthusiastic about the country and believes that China will become the consumer goods production hub of the world.
It may be a fledging relationship but one which Hepworth is convinced is worth developing.
"We have invested a lot of time and people in it, but it is worth it because we are establishing a trading route which should become even more important in 10 years' time."