Payment Methods when Importing from China: A Complete Guide

Suggestion: Watch the 10 minutes video tutorial before reading this article

Click Here to Get the
Starter Package: All Categories

About to pay a manufacturer in China? The payment method, and the process, often has 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.

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 a 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 has 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 of 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.

Watch this video to learn how to get your product made in China, Vietnam & India

I want to book a free consultation call

Are you paying the right company?

A 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 suppliers 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 suppliers 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 take 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.

supplier payment methods

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 Switzwerland.

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 suppliers 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.

Cash RMB

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 fulfil 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 buyers 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 has been fulfilled.

Bank personnel are 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 sellers bank contact 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 (a 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


Bitcoin and other cryptos

In recents months, 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 devestating to the factory. As many of you already know, Bitcoin price fluctiations 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.


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

Payment MethodAdvantagesDisadvantages
1. Accepted by all suppliers with a bank account
2. Low cost
1. Requires an upfront deposit payment
2. No payment protection
1. No deposit payment required
2. Puts pressure on the supplier to comply with buyer requirements
1. Rarely accepted for very small orders (e.g. Below $30,000)
2. Not accepted by all supplliers
3. High fees
Alibaba TA
1. Integrated with Alibabas supplier directory
2. Funds are withheld by Alibaba until the buyer ‘approves’ the goods
1. Not accepted by all Alibaba suppliers
1. Suitable for very small transactions (e.g. Sample orders)
2. Fast. Payments arrive instantly.
1. Not accepted by all suppliers
2. High fees

Do you want to launch your own private label or custom designed product?

It can be hard to go from a design drawing to finished product. To help you manage the entire process – from creating a specification, to sampling and quality control – we created a Starter Package:

a. Private Label & OEM Product Manufacturer Lists

b. Product Specification Templates

c. Product Label Samples

d. Tutorials, Video Walkthroughs and Task Lists that guide you step-by-step through the entire process

In addition, you can also book quality inspections, lab testing and shipping directly from the platform. Click here to learn more.

  • Tags:

    45 Responses to “Payment Methods when Importing from China: A Complete Guide”

    1. Boris September 4, 2014 at 3:00 pm #

      Hi Fredrik

      As I am going through manufacturers on Alibaba and see a few that offer PayPal, credit card or Escrow payment, at this point should I have my peace of mind to stop my verification process? At worst case I will have assistance of 3rd party?

      But let’s take scenario with TT transfer when sourcing samples from 5 manufacturers. Doing TT transfer for each manufacturer will end up expensive just for samples. Maybe manufacturers will allow for PayPal transfer just for samples? If so, how do I know that PayPal payment address belongs to company’s account and not someone’s personal account?


      • Fredrik Grönkvist September 4, 2014 at 4:15 pm #

        Hello Boris,

        1. Don’t make a supplier selection based on payment methods. You may exclude those few suppliers that are actually reliable.

        2. Rather few suppliers offer PayPal payment. I know it is expensive to make a T/T payment, but there’s no way around it.

        • Boris September 4, 2014 at 6:39 pm #

          Then maybe you know someone in China who has warehouse to consolidate packages to save on shipping?

          • Fredrik Grönkvist September 4, 2014 at 8:59 pm #

            Hello Boris,

            Yes, indeed. However, not sure you’d save much on sample shipments though. But for regular shipments, it is possible to combine cargo from different suppliers.

            • Boris September 4, 2014 at 9:18 pm #

              Samples from multiple suppliers are known to have expensive air courier costs. If I manage to consolidate in a warehouse by asking suppliers to send internally in China, I could just ship them out all together and at least save on shipping even if majority of suppliers will only accept bank transfer.

              About regular shipments you mentioned that I can combine cargo from different suppliers. Were you referring to LCL sea shipping?

            • Fredrik Grönkvist September 5, 2014 at 1:08 pm #

              Hello Boris,

              1. Yes, but administration also costs money, so I don’t think you’ll save anything on individual sample shipments. At least not more than few dollars.
              2. Not necessary LCL shipment. You can mix cargo from different supplier in an FCL shipment. That could indeed save a lot of money.

    2. Boris November 19, 2014 at 11:34 am #

      Hi Fredrik! How were trade shows in China and Hong Kong this year?

      I wanted to ask about payment terms like PayPal and Escrow that protect you if supplier fails to deliver expected. With these methods you can save on production inspections service cost.

      With pre-order payment of 30% PayPal first invoice for purchase of raw materials or components, are there supposed to be terms or they should be specified on 30% balance payment’s second invoice? Because what happens if supplier get’s his 30% and runs away? The reasons can be a few like, scammer taking control of email account or supplier closes business? Asking supplier for invoice of materials or components purchased for your production feels uncomfortable but if there would be something that proves materials purchase within specified time frame in agreement, it would give some peace of mind.

      When balance payment of 70% is paid, you have to rely on supplier’s photos but how can you see on photos that your production conforms to sample and do you ask supplier take a photo of your entire production order (boxes/pallets)? In potential rare case but how can you be sure it’s your production photographed and not supplier’s other clients’ last orders before supplier closes factory?

      Would above be different with credit card payment method through Escrow? Since it’s done through Alibaba, does it serve as digital Purchase Order where you specify agreed sales terms and do you reference between pre-order and balance payment order? Can you dispute like you can with PayPal when goods received were not up to expectations and unlike PayPal, can Escrow reverse transaction if supplier runs with your money?

      Finally, do you know if PayPal can offer you way to screen supplier’s account to see if it’s business account with proven track record to make sure it’s not scammer you are dealing with?

      Thanks in advance

      Boris C.

      • Fredrik Grönkvist November 23, 2014 at 6:46 pm #

        Consider the deposit payment lost if anything goes wrong. It’s very hard to get it back, regardless of the reason. I would certainly not trust supplier photos. Instead, you must send a 3rd party quality inspector to the factory, or go there yourself. You cannot be sure that the supplier photos actually the represent the average quality level of the entire batch.

        I have never used Escrow, and I am not sure how it related to dispute resolutions. However, without proper documentation clearly defining the quality and standard of the product, I don’t think Alibaba would refund the money. In many cases, the buyer is at fault, as they have failed to clearly communicate product specifications. This happens far too often.

        No, I am not aware of any such service offered by PayPal.

        • Boris November 23, 2014 at 7:38 pm #

          Fredrik, what if freight forwarder offers inspection at their China warehouse and it turns out that one or more of there following scenarios occurred:

          1. There’s some deviation from sample’s quality/appearance
          2. Defect rate is higher than accepted
          3. Something is missing

          In this case what is supplier supposed to do and what can I do if I paid with PayPal or Alibaba? What can I do if I paid with bank transfer? What order of actions are recommended for amicable solution?

          For MOQ of 150-200 units costing small, what terms should I include to inform supplier of consequences due to non-conformity?

          I think that using payment methods with buyer protection and correct wording will allow some form of enforcement for supplier to respect terms of agreement and there will be no need for 3rd party inspection.


    3. Boris C. April 20, 2015 at 9:49 am #

      Apparently Fredrik PayPal is not buyer friendly because:

      1. If goods are bad/not as described then buyer is responsible for return shipping

      2. Deposit and final payment transactions are not protected

      Here is the link to relevant section in their terms of service:

      From here Escrow or Trade Assurance are the only safe options

      • Fredrik Grönkvist April 24, 2015 at 5:55 am #

        Hi Boris,

        True, but PayPal was built around Ebay from the very beginning, and not really with international trade in mind. The Alibaba Trade Assurance program on the other hand is built in such a way that it adds a layer of protection when importing from foreign suppliers.

        • Boris C. April 24, 2015 at 6:44 am #

          Do you know if wiring funds through T/T payer has some kind of protection against fraud and if some form of dispute resolution is available as well?

          • Fredrik Grönkvist April 30, 2015 at 4:00 am #

            Hello Boris,

            No such protection is offered. It’s up to the importer to carry out their due diligence process properly.

    4. Solongo April 29, 2015 at 4:34 pm #

      Dear Fredrik,

      I found Shanghai Yuruida Chemical Industry to purchase paraffin wax.
      But I think I lost my money.

      What can i do now.
      Is Alibaba responsible or How I can contact Alibaba.

      • Fredrik Grönkvist April 30, 2015 at 3:59 am #

        Hello Solongo,

        No, Alibaba is not responsible, but you should be able to report this to them. If you can prove that you actually paid this supplier, and not an unrelated entity (e.g. offshore company or individual), you will be offered assistance.

      • Jesus Michel October 16, 2015 at 8:15 pm #


        I am in the same situation, did you find them

      • Sam October 20, 2015 at 4:15 am #

        This is a BIG red flag and the only flag I would need to pass on this company. A big chemical company would (I think I can say never when dealing with a chemical plant of this magnitude ) never use hotmail for an email address. This is their email on the website

        • Animesh January 1, 2016 at 1:51 pm #

          Very good observation Sam. Even the website looks like that of a medium to small company, definitely not a big company.

    5. Tony July 28, 2015 at 2:55 am #

      Hi Fredrick

      I am being told by a supplier i have used for quite sometime that if we pay from one country for example the USA the goods cannot be shipped to a different country say Dubai.

      They are telling me this is a new requirement being implemented by the government have you heard anything about this

      Best Regards


      • Fredrik Grönkvist July 28, 2015 at 8:30 am #

        Hello Tony,

        No, I am not aware of any specific change of regulation. However, I do understand that the importing company usually (if not always) must be registered in the country of destination. Thus, listing an American entity as an importer in the UAE is therefore most likely not possible.

    6. Ebrima Janneh August 5, 2015 at 5:37 pm #

      Hello Fredrik, Am the CEO of Green Gambia. I’be been writing with the made-in-China for kraft paper bags, and they’re waiting for my official order. Sir am seeking your counselling and advice on the reliability of the company and best payment strategy. Rightnow am dearly in need of this to go successfully.

    7. Ebrima Janneh August 5, 2015 at 5:40 pm #

      Hello Fredrik, Am the CEO of Green Gambia. I’be been writing with the made-in-China for kraft paper bags, and they’re waiting for my official order. Sir am seeking your counselling and advice on the reliability of the company and best payment strategy. Rightnow am dearly in need of this to go successfully. I want to oder over a ton or more even depending on the company.

    8. Martin October 22, 2015 at 2:26 pm #


      In the case of a T/T payment, what happens if Seller does not send the original Bill of Lading to the buyer? Is there a way to ensure that he does.



      • Angie November 21, 2015 at 4:25 pm #

        I would also like to know the answer to this question. We have a factory who has shipped and have been paid in full but they will not release the bill of lading so that we will not be able to receive the goods when they arrive at port. How can they be compelled to do so?

    9. Bill November 8, 2015 at 5:26 am #

      question on foreign transactions the payor generally would be obigated to withold 30 percent on gross payment for tax purposes or are they exempt do we need to worry about this?

    10. Sanders November 20, 2015 at 7:53 am #

      Hi Fredrik,

      Do you have experience in projects where the 30% down payment was made and production finished, but the buyer was not able to continue with the balance payment because of a recent increase in the USD exchange rate which increased his costs significantly?

      What do you think can be done in these cases? Would it be possible to get the buyers 30% down payment back?

      In this particular case, the product is machinery which was customized based on the buyers requirements.

      Best regards,


    11. Nurit Niskala March 8, 2016 at 11:32 am #

      I like to get your buyer guide please?
      Thank you,
      Nurit Niskala

      • ChinaImportal March 14, 2016 at 3:58 am #

        Hi Nurit,

        You can get the Buyer’s Guide directly on

    12. Afan March 25, 2016 at 9:41 am #

      I need your advice,I bought an item from china, it is a piece of metal (pure vanadium ), and I paid the whole amount of the money, the seller gave me a final price for the item and the shipping cost, so I paid the money. they send the item by air fright using the UPS services . when the item arrived the UK, the courier asked for pay an extra money . so I contact the supplier and I told him about this issue and he said “We confirm we have paid freight charge(shipping cost). So, you don’t need to pay it. Our local UPS office told me that the fee you said might be an import duty you have to pay.” . is there any similar case to my situation and what is your advice.
      Thank you very much and grateful for your help in advance.

      • ChinaImportal March 28, 2016 at 4:23 am #

        Hi Afan,

        Import duties and VAT is not paid to the supplier in China, but upon arrival in the destination. However, UPS should be able to tell you exactly what you’re being billed for.

    13. Magnus June 7, 2016 at 9:38 am #

      Hope someone here can help me.

      I have established a limited company in Hong Kong but so far have not yet opened a business bank account. I was using my personal bank accounts for the first business expenses.

      I am now willing to pay a supplier for an FOB delivery from this personal account.

      The supplier tells me that he can not accept payments from a personal account as this would not allow him to make the export tax reductions and also would not let him agree on FOB.

      To me this is new. Does this make sense?

      • ChinaImportal June 13, 2016 at 4:41 am #

        Hi Magnus,

        Yes, it’s possible that he is right. However, we cannot confirm this as there are so many regulations.

    14. Vicky Liu July 13, 2016 at 3:39 am #

      Paypal can be easily frozen without any warning or reasons. So more and more suppliers refuse to accept Paypal.

      For small amounts, Western union is a good choice.

      No matter which payment method you use, the most important is to check the supplier’s honesty before you pay.

      Here are two ways to check a supplier’s honesty:
      1) Google their export records
      2) Ask for Customer references

    15. Max May 25, 2017 at 3:35 pm #

      I have deposited some money to start the work, for one factory . We made a contract on 24 th of April and they told me machines will be ready in 20 days. Nowadays I am in china and I have seen the factory, there is nothing has been done about my machines so they break the contract because it is already 32days. I have told to Factory director to send my money back. Firstly, he agreed then after sometime he start to refuse the give back the money. What can I do with this case ???

      • ChinaImportal May 28, 2017 at 7:45 am #

        Hi Max,

        Is the supplier listed on and did you pay to their business account? A first step could be to report them to

    16. Thissa June 19, 2017 at 6:14 am #

      Dear Boris

      I did USD 140,000/- payment to a Chinese Manufacturer . Now the supplier disappeared for more than 5 Months .

      What can I do now.


    17. Dale Parker October 16, 2017 at 6:39 am #

      Hello Fredrik,
      I am importing video wall panels to the US from China. The manufacturer is on Global Sources, and looks totally legit. According to Global Sources, the company is 25 years old, dues $250mil USD per year and has 3 factories. Google searches seem to confirm all this as well. I am still leery of just wiring a $30K deposit into the ether, but If there is no real recourse, I will. My endgame plan is to send my partner to view the cabinets in the final phase of production when they are “burning in”. When should I be expected to pay the final $70K? Is there a way to make that happen when the product is safely received by a 3rd party like the shipper?

      • Fredrik Gronkvist October 22, 2017 at 11:19 am #

        Hi Dale,

        Yes, you can write in the contract that you will only pay once the forwarder has received the goods.

        However, the real risk is not in them not shipping the goods.. but quality issues

        Hence, lab testing and quality control in the factory is crucial, before you wire the balance!

    18. Dale Parker October 16, 2017 at 6:43 am #

      Hi Frederik,
      An additional question please:
      Should I use a freight forwarder, or go with the factory guys? If they ship DDU, does that mean that I just have to contact the poet of entry and give them my CC to pay the port fees, etc and the product arrives at my door?
      Best regards,

      • Fredrik Gronkvist October 22, 2017 at 11:21 am #

        Hi Dale,

        You should book shipping via a forwarder, not the supplier.

        The process depends on where you are based

    19. Puneet January 15, 2018 at 12:45 am #

      Hi Fredrik

      Can Alipay escrow can be used by foreigners for payment to chinese freight forwarder? I tried linking my foreign bank card to Alipay but it wouldn’t work. Any suggestions?

    20. Aurélie October 29, 2018 at 4:48 am #

      Hi Frederic,
      I would like to ask you why are you not talking about FINTECHs, like new invoice discounting platforms? :) They are providing cash against verified invoices and debtors. No need to wait after the due date, they ‘re funding with safe credit for operations backed by trade credit insurance on overseas trading.

      • Fredrik Gronkvist October 29, 2018 at 5:24 am #

        Hi Aurelie,

        Do you know any platform that offers such services when paying suppliers in China or Vietnam?

    Leave a Reply

    * Checkbox GDPR is required


    I agree