how to pay china suppliers

On the Internet, many buyers respond to a question time and time again.

What is the best way to pay my Chinese supplier?

The answer is not simple, because each payment method has its advantages and disadvantages, and it is also depends on the size of your order.

Paying to your Chinese supplier through the correct payment method will not only ensure your financial security, but will also bring you other unexpected benefits.

In order to succeed in defeating your competitors in this highly competitive global market, it is very important for you to obtain favorable payment terms when purchasing.   

  • Favorable payment terms can protect your interests and allow you to have a longer capital turnover period.   

Don’t underestimate these advantages, huge gaps are usually caused by these small gaps.

  • The wrong payment method may cause you to be unable to receive the goods on time, may also cause your financial turnover to be unable to carry out your business, and even cause you to receive inferior products.   

Therefore, when you purchase from China, in addition to price, quality and delivery. The payment method is also a factor that you should pay attention to.

And you should know that the payment terms are negotiable, just as you don’t necessarily have to accept the supplier’s first offer.

According to the receiving account payment method can be divided into::

1.   For public accounts: T/T, L/C, D/P, D/A, O/A

2.   For private accounts: Western Union, Paypal, MoneyGram, T/T

Let’s discuss these methods below.


T/T(Telegraphic Transfer) means that the remitting bank, upon the application of the remitter, sends a Tested Cable /Telex or via SWIFT to the receiving bank of the foreign country, instructing it to pay a certain amount to the beneficiary. 

T/T is one of the most commonly used methods of remittance.

T/T is a commercial credit. After the goods are ready, if the customer pays the full payment, the supplier can send the documents directly to the customer without going through the bank. 

The business process is:

  • The remitter submits a wire transfer application and delivers the money to the remitting bank.
  • And then the remitting bank sends a telegram or telex to the paying bank.
  • The paying bank sends a wire transfer notice to the beneficiary, and the beneficiary goes to the bank to redeem the payment after receiving the notice, and the bank conducts the payment.
  • After the payment is completed, the paying bank will issue a debit notice to the remitting bank, and the remitting bank will also send a telegraphic transfer receipt to the remitter.

The telegraphic fee in the wire transfer is borne by the remitter, and the bank generally handles the wire transfer business on the same day, and does not occupy the remittance funds in the postal process.

Therefore, for large amounts of remittances or transfers via SWIFT or between banks, wire transfers are often used.

Types of TT

Advanced TT payment

In the international trade industry, the advanced TT payment means that 100% of the payment is paid before the shipper delivers the goods.

This payment method is the safest trading method for the seller. The advanced TT payment can also be divided into many flexible ways, such as a 20%~40% deposit first, and then 80%~60% before shipment. The specific ratio depends on the situation.

For example:

100% TT prepayment. This means that buyers need to pay the full amount when placing the order. This method is rare, and it is more risky for buyers.

After buyers make the payment, all the initiative is in the hands of the supplier, and buyers cannot control anything.

Dishonest suppliers may delay the delivery time at will, and may send suppliers substandard products or even worse.

For large orders, this method is absolutely unacceptable.

30% upon the order, 70% before the shipment. This method means that buyers have to pay a 30% deposit when placing the order to lock the order, and then pay 70% of the balance after the supplier completes the production.

In some cases, this approach is desirable for buyers. For example, the buyer sets some conditions for the payment of the final payment. For example, the goods must pass the buyer’s quality inspection until the payment.

100% T/T before shipment (after finished the order), which is more risky for suppliers. Because the buyer did not pay any payment to confirm the order.

Unless you are large companies such as Amazon. Apple and have established long-term cooperative relationships with suppliers, otherwise it would be impossible for suppliers to accept this payment method.

TT after shipment

The TT after shipment payment method is defined in the industry as when the buyer pays the balance after the goods are delivered.

So why does the buyer pay the balance? In general, the TT after shipment payment method is based on the B/L copy to pay off the balance.

The TT after shipment mode is also more flexible.

Generally speaking, the generally popular TT after shipment payment method is that the buyer pays a 30% deposit when placing an order, and the other 70% is paid upon the copy of the bill of lading .

Recommended payment method:

30% deposit, balance against b/l copy

This is the most common and fairest payment method, especially in the electronics industry.

  • The 30% deposit gives suppliers a certain amount of funds to purchase raw materials and production, and they will not worry about buyers canceling orders.
  • The supplier’s production cost is usually about 70% of the value of the product, and 30% is not enough to cover the cost of the product, so the supplier does not have to worry about the supplier not delivering the goods after receiving the payment.

The supplier is worried that the buyer will not pay the balance after receiving the goods, and the customer is worried that the buyer will not ship the goods, so 70% balance against b/l copy is a good solution.

This means that the buyer must pay to get B/L to pick up the goods, and the supplier must arrange for the shipment to be paid.

The risk of this payment method for buyers lies in product quality.

Because there are no restrictions on product quality in these series of payment terms.

Therefore, SourcingArts’s suggestion is that the buyer hires quality inspectors to inspect the product quality at the factory after the product is produced, and then let the supplier arrange the shipment until the goods pass the inspection.

20% T/T deposit, 50% T/T payment after production and quality inspection, 30% after delivery in buyer’s country. 

This method of payment is also relatively favorable to buyers, but the only drawback is that buyers need to arrange three payments.

There is a bit of trouble, and buyers have to pay three commission fees, which can run into hundreds of dollars.

This payment term give buyers “some leverage until buyers receive the goods. If the manufacturer played games during the inspection, or ‘salted’ bad products into buyers’ order just before shipment, buyers can still catch it.”

  • The initial 30% PO value is the deposit. This allows suppliers to buy materials and lock in prices (especially important if they have long lead times or handle materials with high price fluctuations, such as metals).
  • The second payment, 50%, occurs upon confirmation of mass products quality.
  • Buyers will then pay the final 20% when they receive the goods and inspect them at their final destination.

Let’s look at this 30-50-20 from the buyer and seller’s point of view to find out why it’s an acceptable middle ground.

The sellers are worried that the buyers will default on payment, so getting 80% (30 + 50) before the goods leave the port limits their exposure.

Since the average factory markup in China is between 20 and 30 percent, 70 percent of the cost covers at least most of his internal costs, so even if the buyer defaults, it won’t bankrupt him.

The biggest concern for buyers is that the goods will be of poor quality or not be available at all. By reserving the last 20% until delivery, the buyer can leverage if quality problems require rework or replacement of parts.

It is also important to remember that only 50% of the payment is paid when they inspect the goods in China. Therefore, if you want to be safe, quality inspection must be a critical part of the payment process.


Generally speaking, the standard payment terms are 30% down payment prior to manufacture and the balance on completion but prior to shipment (or at least prior to the issuance of the original bill of lading). When and under what conditions buyers make their second and final payment is crucial.、

It’s all about motivating suppliers to comply with buyers’ requirements. Therefore, balance payments must be withheld until the lot has been approved by the quality inspector and the final laboratory test results are returned.

In this case, if the supplier does not provide the goods that meet buyers’ requirements, buyers can refuse to accept the goods and arrange a balance payment.

The supplier will suffer a great loss. Because their production costs are usually around 70% of sales, a 30% deposit is far from making up for their losses.

So in this condition, the supplier will be in strict accordance with your requirements of production.

But please note that the results of many quality inspection companies can not be trusted.

You must cooperate with a quality inspector you can trust, otherwise you may receive a false inspection report and create a risk of receiving defective products.

T/T payment process (30% deposit, balance against B/L copy)

  1. Deposit (30%)
  2. Started to produce
  3. Production of complete
  4. Quality inspection/conformity testing
  5. Buyer approves lots
  6. Deliver to the port of loading (e.g. Shenzhen)
  7. Provide a scanned copy of bill of lading
  8. Loading and shipping
  9. Balance payment (70%)
  10. Seller sends an original bill of lading and other shipping documents (need to release goods at the destination port)


A letter of credit(L/C) is a written document issued by a bank with a conditional promise of payment.

In international trade, the buyer and seller may not trust each other. The buyer is worried that the seller will not deliver the goods as required by the contract after the advance payment, and the seller is also worried that the buyer will not pay after the goods are delivered or the shipping documents are submitted.

Therefore, two banks are required to act as guarantors for both buyers and sellers to collect and present documents on their behalf, and replace commercial credit with bank credit (bank credit is higher than commercial credit). The tool used by the bank in this activity is the letter of credit.

A letter of credit is a very safe way of payment for both parties.

For buyers, it can reduce the risk of products not in accordance with the documents.

For suppliers, they can receive money on time.

In addition, the way has no limit for the order amount, so it is suitable for large orders.

You can choose to issue the usance L/C, which is beneficial for you to manage your cash flow. But L/C will need a lot of extra paperwork and not all companies can issue L/C.

The issuing bank will give the credit line after evaluating the company’s performance. So for small orders, L/C is inadvisable. And your bank is going to charge 2% or so of the entire payment.

Classification of Letter of Credit

According to whether the draft under the letter of credit is accompanied by shipping documents, it is divided into:

① Documentary Credit is a letter of credit for payment by documentary draft or only with documents.

The documents here refer to documents representing the ownership of the goods (such as ocean bills of lading, etc.), or documents proving that the goods have been delivered (such as rail waybills, air waybills, postal parcel receipts).

② Clean Credit is a letter of credit for payment with a Clean Draft without shipping documents.

The bank pays with a clean letter of credit, or requires the beneficiary to attach some non-shipment documents, such as invoices, advance lists, etc.

In international trade payment settlement, documentary letters of credit are mostly used.

According to the payment time, it can be divided into

① Sight L/C.

The issuing bank or the paying bank shall make payment upon receipt of documentary drafts or shipping documents in conformity with the terms of the credit.

② Usance L/C.

The issuing bank or the paying bank shall, upon receipt of the documents of the L/C, fulfill the payment obligation within the specified time limit

③ Usance Credit Payable at Sight.

A credit stipulates that a usance draft drawn by the beneficiary is to be discounted by the drawee bank and that all interest and charges are for the account of the openers.

This letter of credit is still payable at sight for the beneficiary and has a clause  of “usance L/C payment at sight.”

The basic contents of a letter of credit:

1. Description of the letter of credit itself: type, nature, number, amount, issuing date, expiry date and place, names and addresses of the parties, transferability of the right to use this letter of credit, etc.;

2. Drawer, drawee, time limit and draft terms, etc.;

3. Name, quality, specification, quantity, packing, transportation mark and unit price of the goods;

4. Transportation requirements: time of shipment, port of shipment, port of destination, mode of transportation, whether freight should be prepaid, whether partial shipment and transshipment can be made in transit, etc.

5. Requirements for documents: type, name, content and number of copies, etc.;

6. Special provisions: different provisions may be made according to the changes in the political, economic and trade conditions of the importing country or the needs of each specific business;

7. Issuing bank’s obligation to beneficiary and draft holder to ensure payment.

L/C payment process (Sight L/C)

  1. The seller and the seller sign a sales agreement which sets out the conditions that must be met before the payment can be released
  2. The buyer will contact his local bank to fill out the application form and pay the deposit or provide other security according to the contract
  3. The issuing bank shall issue a letter of credit to the beneficiary and forward it to the advising bank at the place where the exporter is located.
  4. The advising bank shall deliver the L/C to the beneficiary after verifying the seal
  5. Started to produce
  6. Production of complete
  7. Quality inspection and product testing
  8. The sellers shall make shipment, prepare the documents and draw the draft under the L/C and present the draft to the negotiating bank for negotiation within the validity of the L/C.
  9. The negotiating bank shall advance the payment to the beneficiary after verifying the documents according to the L/C terms and conditions.
  10. The negotiating bank will forward the draft and shipping documents to the issuing bank or its designated paying bank for reimbursement.
  11. After the issuing bank verifies the documents, the payment will be made to the negotiating bank.
  12. The issuing bank notifies the applicant to pay the redemption note.


Documents against Payment (D/P) refers to a settlement method in which the collecting bank must deliver the commercial (freight) documents to the importer after the importer has paid the payment.

Types of D/P

D/P Sight (D/P Sight), which means that the exporter issues the draft at sight, and the collecting bank presents it to the importer. The importer shall pay the bill at sight, and the importer will get the shipping documents when the payment is paid off.

D/P after sight or after date means that the exporter issues a usance draft, and the collecting bank presents it to the importer. After the importer accepts the draft, the importer shall pay the bill of redemption on the maturity date or before the maturity date of the draft.

D/P Payment Process(D/P at sight)

  1. The buyer and the seller agree in the contract to adopt D/P settlement method, which is the basis
  2. Started to produce
  3. Production of complete
  4. The seller prepares all the documents (including shipping documents such as bill of lading, and commercial documents such as bill of exchange, invoice, etc.) after delivery of the goods
  5. The seller shall submit the D/P collection request to its foreign exchange correspondent bank, fill out the collection instruction and deliver all documents
  6. The seller’s foreign exchange bank will accept the collection instruction and all the documents after verification and acceptance, and issue a receipt to the seller
  7. The seller’s correspondent bank shall send the full set of documents in two installments to the buyer’s correspondent bank (which may be appointed by the seller’s bank or as specified by the seller in the collection instruction, the latter being more likely)
  8. The buyer’s bank will present all the documents to the buyer upon receipt of the documents.
  9. Payment by the buyer to the buyer’s bank
  10. The buyer’s bank will hand over all documents to the buyer upon receipt of the buyer’s payment.
  11. The buyer’s bank transfers the money received to the seller’s bank, which transfers the money to the seller’s bank.


Compared with L/C, D/P Sight is simpler for buyers. Because the letter of credit requires the buyer to apply to the bank, while the D/P is for the supplier to submit the application and information to the bank, the buyer only needs to pay and redeem the bill.

However, D/P is not friendly to suppliers, because buyers can only receive payment after arranging the shipment, which makes the supplier very passive, if the buyer does not go to the bank to redeem the order after the shipment , the thing will become very tricky.

Therefore, D/P payment methods are used less frequently, and D/P is usually aimed at long-term old customers.

This payment method belongs to commercial credit, that is, whether the export company can receive the payment depends entirely on the credit of the importer.

Whether the importer can receive the goods on time, quality, and quantity also depends on the credit of the exporter.

D/P is very risky, but if combined with T/T, it is also a very good way of delivery. For example, 30% T/T in advance, 40% before shipment, the balance D/P.


Documents Against Acceptance(DA), which is also delivered to the customer’s bank through the seller’s bank.

The difference is that the buyer can take the original documents only after accepting the seller’s documents, and pay after maturity.

Documents against acceptance is a commonly used method of payment in international trade.

The exporter through the collection bank instructs the collection bank to issue ownership and other shipping documents to the importer after the importer accepts the bill of exchange.

This is a favorable payment method for buyers, because buyers have enough time to turn funds, and even pay for the goods after the product is sold.

However, exporters will face the risk that importers will not settle the payment as scheduled, so usually suppliers do not accept this payment method for new buyers or small and medium-sized buyers.

The above are the 4 main payment methods for corporate accounts.

Western Union, paypal, moneygram and other private account payment methods are usually only used for sample orders or small orders (<$1000), not for large orders. You can visit How to Pay Alibaba Suppliers to learn about the advantages and disadvantages of these payment methods.

payment method

In addition, when you actually communicate with the supplier, you may find that there are other payment methods, such as T/T deposit + final payment at sight letter of credit.

After you have an understanding of the definitions and operation methods of the above four payment methods, you can easily determine whether these payment methods are safe and beneficial to you.

3 points to note when making a payment:

Investigate and analyze suppliers

Regardless of the payment method, the premise is that the supplier is reliable, otherwise you may still get into trouble even with the safest payment method.

Therefore, it is very necessary to investigate suppliers before payment, especially new suppliers.

You can learn about suppliers in the following ways:

Supplier B2B website

Most Chinese suppliers can be found at You can find the supplier’s main products, product parameters, establishment time, factory video, business license and other information here.

You can also use the same search method in /

If you are inexperienced, then you can purchase our(SourcingArts) verified supplier list. Can greatly save your time. Don’t worry about meeting traders.

Or, to put it more simply, you can leave a message below this blog and attach the name of the supplier, and our supplier experts will help you.

All you have to do is tell us the name of the supplier. We are in China and this information is at your fingertips.

Google search

The information of some export suppliers can also be found in search engines, but the SEO of most suppliers may not be so good, so they are usually not listed on the first page, which means you need to dig deeper. Don’t ignore the search results on the next few pages.

Social networks and forums

Nowadays, social networks are very convenient. LinkedIn is a great channel that can provide a lot of help. Almost all foreign trade salespersons will have their own business cards on LinkedIn.

Always remember where your bottom line is

You should try your best to control the initiative and make appropriate compromises, but you must adhere to the necessary bottom line to avoid the risk of receiving inferior products or incapable of capital turnover.

Draft a strong agreement

Ideally, before you make any payments to potential suppliers, you must ensure your interests by drafting strong payment terms in the agreements you have signed with them.

These terms are related to the time of payment and the choice of payment method. If you are looking for a supplier through Alibaba, it is best to deal with the supplier through Alibaba Trade Assurance.

How to negotiate better terms with your Chinese supplier over time

If you’re nervous when you pay 30% of the money to your supplier before production of your products even begins, remember that your supplier is equally as nervous that they’ve began producing products and haven’t received 70% of the payment.

Trust is of huge importance when doing international business and so is your credit.

As you build a relationship with your supplier, you can negotiate better payment terms.

We’ve all lent money to friends with varying degrees of skepticism. Some friends we’re happy to lend thousands of RMB to and not worry about when they pay us back because we know they will pay us back.

Other friends, we’re nervous to lend even ¥100 because we’re unsure if we’ll be paid back.

The same is true for your Supplier. If you’ve placed several orders with your Supplier and engaged in relationship building activities like actually visiting them in China, you are building credit with your supplier.

Over time, you can even ask to pay for part of an order after you have received it.

What are the standard payment terms when importing from China?

Most suppliers require a 30% deposit, the remaining 70% must be paid before shipment or before you receive the original bill of lading.

Although this means that you are putting money at risk, you will still have to control the remaining balance and pay only after quality control.


There are always some risks in international payments. We cannot claim to be 100% safe now.

To minimize risks and avoid fraud, you must conduct due diligence, verify the supplier’s information, and ensure that they are a legitimate company.

As for various payment methods. Each method has its advantages and disadvantages. And there are some methods that are particularly favored by suppliers.

What you need to do is to make a thorough comparison and talk to your supplier to find the solution that best suits your payment method and terms.

Generally speaking, although you have many ways to pay Chinese suppliers, in the end, wire transfer is still the most direct and most popular way.

Only those factories that are larger and more mature have the flexibility to support other payment methods.

For more knowledge about sourcing from China, welcome to visit!

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