China Sourcing Payment Terms and Finance
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How you pay a Chinese supplier shapes how much risk you carry. The three workhorses are T/T (telegraphic transfer, usually 30% deposit / 70% before shipment), Letters of Credit for larger orders where a bank guarantees payment against documents, and escrow on platforms like Alibaba Trade Assurance for first-time deals. Each shifts bargaining power differently: a 30/70 T/T is fast but exposes the deposit, while an LC costs bank fees but ties release to inspection-backed shipping documents.
The frequent mistake is wiring 100% upfront to a new supplier or paying the balance before a final inspection. We structure terms so the largest tranche is released only after a passing pre-shipment inspection, and confirm the receiving account name matches the verified factory's legal entity.
Guides (1)
FAQ
What payment terms are normal for a first China order?
A 30% deposit and 70% balance before shipment (30/70 T/T) is the common baseline. For a first deal, paying the balance against a passing pre-shipment inspection — or using Trade Assurance escrow — protects you better than paying on the supplier's word.
When is a Letter of Credit worth the cost?
For larger orders (typically tens of thousands of dollars and up) with a supplier you don't fully trust yet. An LC makes a bank release payment only against compliant shipping documents, but it carries bank fees and demands precise paperwork on both sides.
Is it safe to pay the full amount upfront for a discount?
Rarely. A small discount doesn't offset losing all bargaining power if quality or delivery goes wrong. Keep a meaningful balance tied to shipment or inspection, and never wire to a personal account that doesn't match the factory's registered name.
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