Making Payment to China | How to Send Money to China Suppliers?
How to Send Money to China Without Falling for Scams? We recognize the critical role payment methods play in determining the success of transactions.
This is especially true when purchasing from overseas suppliers, where the choice of payment can be the difference between a smooth deal and a costly failure.
In this guide, we’ll explore six common methods for securely sending money to Chinese suppliers, helping you minimize risks and avoid scams.
Table of Contents
Timing Your Payments to Chinese Suppliers
Paying a 30% deposit upfront before production is standard practice, with the remaining balance due upon completion but prior to shipment. However, the timing and conditions of this final payment are crucial.
This structure incentivizes suppliers to meet your specific requirements. Paying the full amount upfront—before quality checks or regulatory compliance—removes this leverage, increasing your risk. Therefore, it’s wise to withhold the balance until key milestones are met.
That said, even this method isn’t foolproof. The initial deposit remains vulnerable, and suppliers still face losses if issues arise, despite having secured it.
How to Send Money to a Chinese Factory Safely?
Securely sending money to China depends on the transaction type and how it’s managed. Wire transfers, for instance, are risky due to the lack of refund options.
However, with careful oversight, they can offer maximum control over the process.
For added security, you can use a Letter of Credit (L/C). However, this can be risky if set up by someone inexperienced in drafting its terms.
Understanding Chinese Banking Regulations
China’s State Administration of Foreign Exchange (SAFE) imposes strict controls on cross-border payments.
For example, suppliers may need to provide documentation proving the transaction’s legitimacy, which can delay funds. Buyers should confirm with suppliers whether additional paperwork (e.g., commercial invoices or contracts) is required to comply with SAFE rules, ensuring smoother transfers.
Telegraphic Transfer (T/T) Payment to China
– Security: 1 out of 5
What Is a T/T Payment and How Does It Work?
A T/T payment, or telegraphic transfer, is an electronic funds transfer commonly used for international wire transactions. Funds move from the buyer’s bank to the seller’s bank.
When a Chinese supplier requests a T/T payment, they typically mean a wire transfer. Although often used interchangeably, a wire transfer isn’t technically identical to a T/T payment.
In Asia, wire transfers are the most popular payment method for international trade. Processing takes 3 to 5 business days, with fees ranging from $25 to $50, depending on your bank’s terms.
How to Send a T/T Payment to China?
To initiate a T/T payment, contact your bank’s commercial department and specify the amount to wire to a Chinese company. They’ll provide a form to complete, or if you’re a repeat user, their online banking platform can streamline the process.
The Chinese supplier will likely send a proforma invoice containing their bank details. Request this information in advance to verify its authenticity.
Beware of scams where hackers send fraudulent invoices with altered bank details. After completing the transfer, send a screenshot or digital receipt to your supplier for confirmation.
Key tips to follow:
- Double-check all details to avoid delays from errors, which can hold up payments for weeks.
- The company name should be in Chinese but written in English. Ask the supplier for the exact registered name rather than translating it yourself.
- For long company names, use the ‘address 1’ field on the form.
T/T Payment Procedure:
The typical T/T payment process to China includes:
- Pay a 30% deposit.
- Production begins.
- Production completes.
- Products undergo quality and compliance testing.
- Buyer approves the batch after testing.
- Products are delivered to the loading port.
- Scan copies of the bill of lading are provided during transit.
- Shipment and loading procedures conclude.
- The remaining 70% balance is paid post-shipment.
- The supplier sends the original bill of lading and other documents required for cargo release at the destination port.
Which Payment Method Do Chinese Suppliers Prefer?
Chinese suppliers frequently request bank wire transfers. Here’s how it typically works:
- The supplier develops product samples until they meet your specifications.
- You send a 30% deposit via T/T before production starts.
- The supplier purchases materials and begins production.
- You can hire a quality assurance firm to inspect the goods.
- Pay the remaining 70% before shipment.
- The supplier ships the goods and sends documents via courier.
Visually, the process looks like this:
Tips for Sending T/T Payments to China
While T/T is widely accepted by Chinese sellers, it offers little protection unless paired with an L/C, making it inherently risky.
Here are some practical suggestions:
- Split payments into 30% deposit and 70% post-completion to reduce risk.
- Avoid depositing funds before signing a sales contract and receiving a proforma invoice.
- Pay the balance only after receiving quality control reports or inspection results.
- Never pay 100% upfront, as this removes the supplier’s incentive to address defects or quality issues.
- Be prepared to pay the 30% deposit 30 days in advance, as many Chinese suppliers don’t hold stock and outsource production.
L/C (Letter of Credit) Payment to China
– Security: 4 out of 5
Unlike the less secure T/T method, an L/C offers buyers enhanced protection. It ensures the supplier meets predefined conditions before funds are released, eliminating the need for a deposit and minimizing buyer risk.
A common question is: What conditions trigger payment under an L/C?
The bank releases funds to the supplier only after verifying all required documents. Since bank personnel aren’t industry experts, they meticulously review paperwork to ensure compliance before transferring money.
Buyers and sellers negotiate the specific documents required, which might include:
- Approved quality reports post-inspection to prevent defective shipments.
- A bill of lading issued by a set date to avoid delays.
- Lab testing reports to ensure compliance.
L/C payments are widely accepted by manufacturers and suppliers across China and Asia.
Letter of Credit (L/C) Payment Procedure:
Here’s how to use an L/C to send money to China:
- The buyer and seller negotiate terms and sign a sales agreement outlining payment conditions.
- The buyer applies for an L/C through their local bank.
- The buyer’s bank presents the L/C to the seller’s bank in China.
- The seller’s bank notifies the supplier and provides payment advice.
- Production starts and completes, followed by quality inspection and testing.
- Once approved, goods are shipped from the loading port.
- The supplier submits documents (e.g., quality reports, freight papers) to the bank.
- Funds are released once all conditions are satisfied.
Use Escrow Services: Alibaba Trade Assurance
– Security: 4.5 out of 5
Alibaba Trade Assurance shares similarities with an L/C, as both release funds only when agreed conditions are met, such as:
- Order completion by the specified delivery date.
- Products meeting approved quality and specification standards.
The key difference is that buyers must deposit funds into an Alibaba account via T/T or credit card before production begins.
Is Alibaba Trade Assurance Safe?
Yes, Trade Assurance is among the safest ways to buy through Alibaba. It protects your order until delivery, and if the goods aren’t received, Alibaba assumes full liability and mediates disputes with the supplier.
Alibaba Transaction Fees:
Alibaba charges a 2.95% processing fee per transaction, with limits varying by payment method (e.g., MasterCard vs. American Express). This fee is deducted upon payment.
Send Money to China with PayPal
– Security: 4 out of 5
PayPal’s high fees (3.4% to 4.4%) make it ideal for sample or small orders rather than full shipments.
Transfers are free between U.S.-based PayPal accounts, but this rarely applies to Chinese suppliers, who typically register with Chinese addresses and IPs.
To save on fees, link a bank account to PayPal instead of a credit or debit card. Bank transfers via ACH are harder to dispute, reducing PayPal’s risk and additional charges. See PayPal.com for fee details.
When Is PayPal Suitable for Sending Money to China?
PayPal’s credit card option is convenient for low cash flow or expensive items, offering six months of refund protection if tracking details are provided.
Chinese suppliers prefer PayPal for amounts under $500 USD to avoid scams. For larger orders, they often request alternative methods.
A downside for Chinese recipients is that PayPal doesn’t allow USD withdrawals—they must convert to RMB, incurring a $35 fee per withdrawal.
Use Western Union to Send Money to China
– Security: 0 out of 5
Western Union, established in 1871, is a well-known money transfer service with over 500,000 agent locations worldwide.
How to Send Money to China via Western Union?
Western Union now offers online, in-store, and mobile app transfers, evolving from its earlier in-person-only requirement.
Fees vary by method, with in-person transactions typically being the cheapest. Recipients don’t need a bank account—just basic details like name, city, province, and contact number.
After sending, provide the recipient with:
- The MTCN number from Western Union.
- Sender’s name.
- Transfer amount.
- Recipient’s name.
In China, recipients present their ID at an agent location, fill out a form, and collect the cash.
Western Union Transfer Fees:
Check exact fees on Western Union’s official site. To minimize costs:
- Send cash in person—credit/debit card fees are higher (PayPal may be cheaper).
- Opt for slower transfers to reduce fees; same-day service costs more.
- Have recipients collect cash at an agent location to avoid bank deposit fees.
Tips for Smooth Western Union Transfers:
For a seamless experience:
- Verify the recipient’s first and last names—errors can delay payments.
- Contact Western Union immediately to correct recipient details if needed.
- Avoid including business details, as Western Union prohibits commercial transactions.
- Confirm the recipient’s annual limit—Chinese individuals can receive up to $50,000 USD yearly.
Special Notes for Western Union to China:
Western Union’s exchange rates are unfavorable, so avoid it for currency conversions (e.g., USD to RMB).
For large amounts, compare Western Union fees with T/T costs.
Western Union’s popularity in China is declining due to high agent fees. Confirm ease of use with your recipient beforehand.
Send Money to China with Wise
– Security: 4 out of 5
Wise (formerly TransferWise) offers a low-cost alternative for international transfers, using mid-market exchange rates and charging fees as low as 0.5% to 1%. It’s ideal for small to medium transactions but may not be accepted by all Chinese suppliers due to its limited adoption in B2B trade.
Processing takes 1-2 days, and funds are deposited directly into the supplier’s bank account. Verify supplier acceptance before using Wise.
Comparison of Chinese Suppliers Payment Methods:
Here’s a quick comparison of the payment methods discussed:
| Method | Security (1-5) | Cost | Speed | Best For |
|---|---|---|---|---|
| T/T | 1 | $25-$50 | 3-5 days | Large orders with trusted suppliers |
| L/C | 4 | Varies (bank fees) | Varies | High-value, secure transactions |
| Alibaba Trade Assurance | 4.5 | 2.95% | Instant | Alibaba purchases |
| PayPal | 4 | 3.4%-4.4% + $35 withdrawal | Instant | Small/sample orders |
| Western Union | 0 | Varies | Same day | Personal, non-commercial use |
| Wise | 4 | 0.5%-1% | 1-2 days | Cost-conscious buyers |
Negotiating Better Payment Terms with Chinese Suppliers
In these three scenarios, you can secure more favorable terms:
If your company is well-established, leverage your reputation to negotiate flexible payments or supplier financing.
With strong financial backing and annual purchases exceeding $1 million USD, partner with a trade assurance firm to defer payments while providing suppliers with immediate cash.
Having a buying office in China builds trust, potentially allowing a 0% deposit and 100% post-shipment payment arrangement.
Sending Money to China While Avoiding Scams
Payment scams are prevalent, often involving fraudsters tricking buyers into transferring funds to illegitimate accounts. This can occur by altering bank details on a proforma invoice—sometimes through corrupt employees or sophisticated email hacking.
In advanced cases, scammers hijack supplier email accounts, modify invoices, and intercept buyer-supplier communication to prevent discrepancies from surfacing.
When suppliers don’t receive funds, they refuse to ship, leaving buyers unable to recover payments quickly. Many suppliers list bank details on platforms like Alibaba.com, where inattentive buyers fall prey to scams by failing to verify account ownership. Learn more about avoiding Alibaba scams.
How to Verify Chinese Suppliers
To reduce scam risks, take these steps:
- Request a copy of their business license and verify it with local Chinese authorities.
- Contact the supplier directly via phone or video call to confirm their identity.
- Use third-party services like Supplyia or SGS to audit the supplier’s legitimacy.
Case Study: A Buyer’s Experience
Consider John, a U.S.-based importer sourcing electronics from China. He opted for Alibaba Trade Assurance for a $10,000 order. After production, the supplier shipped defective goods, but because John used Trade Assurance, Alibaba mediated the dispute and refunded him fully within two weeks. This highlights the value of secure payment methods when dealing with new suppliers.
Using a Chinese Payment Agent
China payment agent services facilitate payments to suppliers on behalf of clients, overcoming challenges like currency conversion, payment method compatibility, and language barriers.
These services are especially valuable for businesses sourcing from Chinese manufacturers, ensuring smoother and safer transactions.
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