How to pay Chinese suppliers safely
The common payment methods, when each fits, and the simple checks that prevent most payment fraud.
The two questions behind every payment
Every payment decision comes down to two things: what happens if the goods never arrive or arrive wrong, and how much of your money is exposed at the moment that becomes clear.
Most first-time importers focus on the method and skip the structure. The structure matters more. A well-staged payment through an ordinary bank transfer leaves you far better off than a full prepayment through something that sounds safer.
Bank transfer, and how to stage it
The international bank transfer, usually called T/T, is how most China trade is paid. It is cheap, fast and universally accepted, and it offers no protection at all by itself. Once the funds have been withdrawn at the other end, a transfer is very hard to recall.
So the protection has to come from staging. The common shape is a deposit to start production with the balance payable against a satisfactory pre-shipment inspection, before the goods are released for loading. That arrangement keeps some of your money on your side of the table until somebody has actually looked at what was made.
Paying the full amount before production is the arrangement to avoid. It removes every piece of leverage you have at exactly the point in the process when you are most likely to need some.
Whatever you agree, make the trigger for the balance an event rather than a date: inspection passed, photographs approved, documents received. A date arrives whether the goods are right or not.
Letters of credit, escrow and cards
A letter of credit shifts the transaction onto documents: the bank pays when the specified paperwork is presented. It is genuinely protective for large orders and it is expensive, slow, and unforgiving of small discrepancies. It also protects against documentary failure rather than against poor quality, since correct documents can accompany disappointing goods.
Platform escrow holds your payment until delivery is confirmed. It is useful and it is bounded by the order: it protects against goods that do not match what the order says, so its value is only as good as the specification you wrote.
Cards and PayPal appear on smaller orders and carry consumer-style protections that were not designed for international B2B manufacturing. Fees are higher, and many suppliers price that in. They are reasonable for samples and small test orders, and rarely the right instrument for a production run.
The account details are where the money is lost
The most common serious loss in China trade is not a supplier who fails to ship. It is a payment sent to the wrong account after an email announcing new bank details.
Check that the account name matches the registered company name on the contract and the business licence exactly. Fraudulent accounts often match the name on the invoice and not the name on the licence, which is why checking against the licence is the test that works.
Never accept changed bank details by email. Confirm by voice or video using a number you already had, not one supplied in the message announcing the change. Be sceptical of a personal account, and treat any urgency attached to payment as a reason to slow down rather than speed up.
If a payment does go astray, contact your bank the same hour and ask them to attempt a recall, then report it to Action Fraud. The window in which funds can sometimes be stopped is very short.
Currency, and the rate that is not your bank's
Most China trade is quoted in US dollars. If you buy in dollars and sell in pounds, your cost moves between the day you commit and the day you pay, which on a long production cycle is a real exposure. A forward contract fixes it if the order is large enough to bother; for smaller orders, simply knowing the exposure exists is most of the benefit.
Keep one thing separate in your head. For the customs declaration, the conversion is not your bank's rate on the day and it is not the rate you actually paid. HMRC publishes a rate for the month and the entry must use that one, which is why the duty you pay can differ from the duty you modelled.
Practical rules that keep you out of trouble
Stage the payment and tie the balance to inspection rather than to a date. Verify the account name against the business licence, not the invoice. Never change payment details on the strength of an email. Keep the quotation, specification, approved sample, order, inspection report and payment records together, because a dispute is won by whoever can show a consistent story.
And be wary of a supplier who wants unusual terms early. Full prepayment on a first order, or a request to pay a third party, is worth pausing over, however good the price is.
Frequently asked questions
What is the safest way to pay a Chinese supplier?
For most orders, a staged bank transfer: a deposit to begin production and the balance released against a satisfactory pre-shipment inspection. The method matters less than the structure; full prepayment through any method is the arrangement that puts you at most risk.
What deposit is normal?
A deposit up front with the balance against inspection is the usual shape, and the split is more negotiable than the unit price. Tie the balance to an event such as a passed inspection rather than to a calendar date.
Is a letter of credit worth it?
For large orders it can be, but it is expensive, slow and strict about documentary discrepancies. It protects against paperwork failure rather than against quality, since correct documents can accompany goods you are unhappy with.
My supplier says their bank account has changed. What should I do?
Treat it as fraud until proven otherwise. Do not reply to that email. Call a number you already had and confirm by voice or video, and check the new account name matches the registered company name on the business licence exactly.
Can I pay a Chinese supplier by credit card or PayPal?
Sometimes, and it is reasonable for samples and small test orders. Fees are higher and many suppliers price them in, and the protections were designed for consumer purchases rather than international manufacturing, so it is rarely the right instrument for a production run.
Which exchange rate applies to my customs declaration?
Not your bank's rate on the day and not the rate you paid. HMRC publishes a rate for each month and the declaration must use that, which is why the duty payable can differ from the figure you modelled when you ordered.