Payment Methods when Importing from China: A Complete Guide


About to pay a manufacturer in China? The payment method, and the process, often have a major impact on the outcome. In fact, it can spell the difference between success and failure, when buying from overseas suppliers. In this article, we introduce you to four common payment methods, used when transferring funds to Chinese suppliers.

Content Overview

  • Telegraphic Transfer (T/T)
  • Letter of Credit (L/C)
  • Alibaba Trade Assurance
  • PayPal
  • Bitcoin and other cryptocurrencies
  • Payment frauds and scams
  • USD bank accounts for importers
  • Sending Money to China: Q&A with Neat in Hong Kong

Telegraphic Transfer (T/T)

The Telegraphic Transfer is standard bank transaction, placed either through your internet bank or in a local bank branch. This payment method is accepted by all Chinese manufacturers with a bank account. Virtually all, that is. Albeit common, it offers no protection by itself, unlike the Letter of Credit, which I’ll get back to in a bit.

That is, however, not saying that T/T is necessarily an unsafe payment method.

Paying the right amount, at the right time, is the key to success

The standard payment term is a deposit payment of 30% upfront, before manufacturing, and balance payment upon completion – but before shipping (or at least, before the original Bill of Lading is issued).

The timing of when, and under which conditions, you are making this second and final, payment, is crucial.

It’s all about giving the supplier an incentive to comply with your requirements. By paying the supplier in full, before regulatory compliance and quality have been verified, you take that incentive away. Thus, the balance payment must be withheld until after the batch has been approved by a quality inspector, and after eventual lab test results are back.

While it’s true that this payment method is not protecting the initial deposit payment, the supplier still has much to lose, even with a deposit payment secured.

Chinese manufacturers often run on very slim profit margins. Even if they would cut off a buyer making demands, and attempt to sell the batch domestically, they are almost certain to make a hefty loss. The supplier simply has much to lose by not completing the transaction.

Are you paying the right company?

Payment fraud is a common, yet simple, scam. The buyer is persuaded into transferring funds to a bank account not held by the suppliers. The fraud is carried out by simply changing the bank details on the Proforma Invoice. The method to do this varies. We’ve seen cases that were most likely carried out by, obviously corrupted, employees.

Other, more advanced, forms of the classic payment fraud involve an outside party hacking the supplier’s email account, only to replace the bank details on the invoice and forwarding it to an unsuspecting purchasing manager.

As the fraud is carried out using the supplier’s email account, often hosted on publicly available emailing services rather than a company-owned domain, the fraud rarely raises suspicion on the other side. Sometimes, they even take it further, by diverting email communicating between the actual supplier and the buyer, to ensure that no conflicting communication occurs between the two parties.

As the supplier never received the money, they will, without exception, refuse to ship the goods. Retrieving the payment is close to impossible, as it often takes days before the buyer, and supplier, understood what happened. We receive emails from time to time from suppliers, issuing payment fraud warnings – most likely due to a recent case.

We’ve also noted that more and more suppliers put their bank account details directly on their B2B supplier directory pages, for example on

The scam is successful, as few, even experienced, buyers bother to check whether the account is held by the supplier. The situation is further aggravated by the fact that many Chinese suppliers, for various reasons, request payments to offshore entities – sometimes even privately held accounts. However, that’s a whole other story.

For mysterious reasons, overseas buyers fail to use common sense when dealing with Asian suppliers.

I’m quite sure that most American and European buyers would think twice before paying a domestic supplier to a bank account held under a completely different company name, in a different region or even country.

Can I pay my supplier in RMB?

Paying a supplier in RMB (Chinese Yuan) can result in a slight price reduction (1 – 3%), as you get a better exchange rate compared to USD payments. However, RMB payments are only available to a few countries.

So far, I only have personal experience with companies in Switzerland, paying their Chinese suppliers in RMB. This is only made possible by a free trade agreement between China and Switzerland.

RMB payments are also possible for Hong Kong-based companies. But, the USD will likely remain the primary global currency for a long time to come.

T/T Payment process

1. Deposit payment (30%)

2. Production starts

3. Production completion

4. Quality Inspection / Compliance testing

5. Buyer approves batch

6. Delivery to the Port of Loading (e.g. Shanghai)

7. Bill of Lading Scan Copy provided

8. Loading & Shipment

9. Balance payment (70%)

10. Seller sends original Bill of Lading and other freight documents (required to release cargo in Port of Destination)

Other suggestions

a. Recommended division between deposit and balance payment: 30% Deposit (Before Production) / 70% Balance (After Production)

b. Never pay the deposit before you have a signed and stamped Sales Contract & Performa invoice.

c. Never pay the balance before you have completed any Quality Inspections (in China) or received Product Test results (for example REACH, RoHS and CA Prop 65)

d. Never prepay 100% before production. By doing so, you remove the supplier’s incentive to remake or repair defective or non-compliant items.

e. Most Trading Companies also require you to pay a deposit about 30 days before delivery to Port of Loading (in China). The reason is simply that most Trading Companies in China don’t have ready-made products in stock but is rather subcontracting your order to a local factory.

Letter of Credit (L/C)

Unlike T/T, a Letter of Credit enables the buyer to add an extra layer of security, by forcing the supplier to fulfill certain, pre-determined, requirements before the funds are transferred. The key point here is that no deposit payment is required, which vastly reduce the risks on the buyer’s side.

The question, when paying by Letter of Credit, is under which conditions the payment shall be ‘released’.

The bank will automatically release the funds to the supplier and then credit the buyer, automatically once these conditions have been fulfilled.

Bank personnel is not industry experts. Once they have received the required documentation, the money is transferred.

It’s entirely up to the buyer and seller to negotiate which specific documents the latter must provide before the transaction is made. A few examples of such conditions are listed below:

  • Bill of Lading (issued on or before a certain date, to avoid delays)
  • Approved Quality Inspection Report/s (to avoid shipment of defective items)
  • Approved Laboratory Testing Reports (to avoid shipment of non-compliant items)

Yet, far from all manufacturers in China, and other Asian countries, accept payment by Letter of Credit. Click here to learn more about Letter of Credit payments, when importing from China.

L/C Payment process

1. The seller and buyer sign a Sale Agreement that states the conditions that must be fulfilled before the payment shall be released

2. The buyer contacts its local bank and applies for an L/C

3. The buyer’s bank contacts the seller’s bank (in China) and presents the Letter of Credit

4. The seller’s bank contacts the seller and presents a payment advice

5. Production starts

6. Production completed

7. Quality Inspection & Product Testing

8. Delivery to the Port of Loading and Shipment

9. The provides the required documentation to their local bank (e.g. Quality Inspection Report, Test Report and Freight Documents)

10. The funds are released, if the conditions are fulfilled (i.e. the right documents are presented)

Alibaba Trade Assurance

Alibaba Trade Assurance is similar to a letter of credit, in the sense that the money is only released when the supplier fulfills the following objectives:

1. Complete the order on time (final delivery date is specified)

2. The products match the approved specifications and quality requirements

The difference is that the buyer must deposit the money to an Alibaba account, by T/T or credit card, before the supplier starts production.

Articles about Alibaba payment methods

  • Alibaba Trade Assurance Explained: What Importers Must Know
  • How to Order from Alibaba in 3 Steps
  • How to Pay Suppliers on Alibaba: A Complete Guide


PayPal payments are suitable for samples orders – or very small orders. Due to the relatively high transaction fees (around 3.4 – 4.4%), this payment method is never applied to ‘real orders’.

I’ve found that Chinese PayPal accounts are rarely held by the actual company entity, even though Chinese companies can set up business PayPal accounts.

Payment Method Comparision

T/T1. Accepted by all suppliers with a bank account2. Low cost1. Requires an upfront deposit payment2. No payment protection
L/C1. No deposit payment required2. Puts pressure on the supplier to comply with buyer requirements1. Rarely accepted for very small orders (e.g. Below $30,000)2. Not accepted by all suppliers3. High fees
Alibaba TA1. Integrated with Alibaba’s supplier directory2. Funds are withheld by Alibaba until the buyer ‘approves’ the goods1. Not accepted by all Alibaba suppliers
PayPal1. Suitable for very small transactions (e.g. Sample orders)2. Fast. Payments arrive instantly.1. Not accepted by all suppliers2. High fees

Sending Money to China: Q&A with Neat

Neat, based in Hong Kong, recently launched their online USD account service for small businesses in Hong Kong, Australia, and various European countries.

In this Q&A, Elizabeth Ching explains how a USD account can benefit you when working with suppliers from Mainland China

What information do I need before I send money to a Chinese factory?

Typically, if you’re sending money to a company in China, you’ll need the following:

The basics:

  • Company ID, which can be either the Company Social Credit Code or Company Organisation Code
  • Company address
  • Bank name and bank account number
  • SWIFT or CNAPS code (CNAPS stands for the China National Advanced Payment System – basically their system to identify Chinese banks)

Payments into China also require quite a few details related to the purpose of your transfer.

Depending on the type of transfer you’re doing, you also may have to provide invoice details too.

  • Date
  • Quantity of goods
  • Shipment company
  • Payment amount

Is USD the only currency accepted by Chinese suppliers?

Nope. While many do accept USD, it depends on the supplier. Most will also accept RMB, the Chinese currency.

To expand, many Chinese suppliers choose to have USD bank accounts in Hong Kong, since inflow and outflow of money in China is very strictly regulated, whereas Hong Kong has a very free economy.

How can a USD account help if I import products from China?

Like we mentioned above, many Chinese suppliers accept USD and have USD accounts in Hong Kong.

So, if you have a USD account, you can pay suppliers directly in USD and don’t have to worry about:

a. Currency conversion

b. Sending money to China (which can be complicated and expensive)

How can Neat help importers with USD accounts?

Neat provides fully-digital multi-currency accounts – that support HKD, USD, EUR, and GBP – that can be opened online.

Because Neat’s USD accounts are stored in Hong Kong, this gives you an advantage if you’re paying a Chinese supplier who has a Hong Kong account, you can avoid international transfer fees, as your transfer will be processed locally.

Otherwise, if you need to send a payment to China, due to Neat’s direct relationships with Chinese banks, sending payments to suppliers in China are typically much smoother and less likely to be rejected.

What are your transaction fees?

The fee to make a transfer to China is HK$90, similar to our international transfer fees to other countries.

How does that compare to banks?

Unlike the average local bank in Europe or the US, Neat has on-the-ground experience and know-how. With a local team in China, they’re up-to-date with knowledge on the constantly shifting regulations and compliance standards associated with accepting funds from outside of China.

This ultimately ensures that your payment isn’t held up or rejected by the receiving Chinese bank.

What’s more, there are very few banks or remittance services that are built especially with both Western and Chinese companies in mind. Because Neat has both a local team in China as well as an international team in Hong Kong they service both markets.


What are the standard payment terms when importing from China?

Most suppliers require a 30% deposit, and the remaining 70% paid before shipment. While this means that you risk the deposit, you do maintain control of the remaining balance, which should only be paid after quality control and lab testing.

Can I pay my supplier after the goods arrive?

No, you must pay before you receive the products. At best, your supplier can agree to accept payment upon release of the bill of lading, but that’s about it.

The supplier would be entirely exposed to fraudulent buyers if they would accept payment after delivery, not to mention all buyers that would fabricate quality issues and find all sorts of reasons to not pay.

Can I get credit from my supplier?

Big buyers like Wal-Mart can get generous credit lines from their suppliers, which for example can allow them to pay 90 days after delivery. However, the same is not offered to small buyers.

Can I pay Chinese suppliers in Euros, AUD, GBP or other currencies?

While it’s technically possible to wire Euros to bank accounts in Hong Kong and Mainland China, few suppliers accept Euro payments since the early 2010s due to its instability back then. Today, the US dollar is the only de facto currency when paying Chinese suppliers.

What is the safest payment method when importing products?

That depends entirely on the type of transaction and how it’s managed. For example, wire transfers are unsafe in the sense that there is no refund mechanism.

However, if you manage the payment process well, it gives you maximum control while it’s also relatively easy to ensure that you pay the right company.

Letter of Credits, on the other hand, offer an added layer of safety, but can also be risky if the terms are set by someone without the right experience.

Do I need a USD bank account to pay my supplier in China?

No, you can convert your local currency (e.g. AUD or EUR) into USD when wiring money to your supplier’s bank account. That said, opening a USD bank account can help you control exchange rate risks.

Can I pay my supplier with Bitcoin or other cryptocurrencies?

Many of our readers have asked us if it’s possible to pay manufacturers in Bitcoin and other cryptocurrencies. The rationale behind this is the idea of instant payments, without the need for bank fees. In reality, Bitcoin payments are neither free nor instant.

Today, no suppliers in China accept Bitcoin or other cryptos as a currency. There are two reasons for this:

1. Bitcoin is too volatile. Given that a supplier only makes a 4-5% profit on each order, even a modest fluctuation in the Bitcoin to USD price would be devastating to the factory. As many of you already know, Bitcoin price fluctuations tend to be anything but modest.

2. Bitcoin and other crypto transactions are essentially banned in Mainland China. This will not change for a long time to come.

In other words, it will take a long time before you will pay your supplier in Bitcoin – if the day ever comes.

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