How to Pay a Chinese Supplier Safely: T/T, L/C and Escrow Explained

Payment is where a sourcing relationship becomes real money at risk. The methods below are all standard, legal instruments — the differences are in who carries which risk, and for how long. None of them replaces verifying the supplier first; they limit the damage when something goes wrong anyway.

Telegraphic transfer (T/T) — the workhorse

The most common structure in China trade is a deposit before production (commonly around 30%) with the balance paid against a copy of the bill of lading after shipment. The logic: the deposit covers the supplier's raw material outlay, and you do not release the final payment until proof of shipment exists.

• Avoid 100% advance payment on a first order. Suppliers with nothing to hide rarely need it; those who insist on it are asking you to carry all the risk.
• For repeat orders with a proven supplier, 30/70 remains common, though both sides often relax terms as trust builds.
• Agree in writing what documents trigger the balance: B/L copy, packing list, inspection report.

Letters of credit (L/C) — for larger orders

A letter of credit moves the payment guarantee to a bank: you pay only when the supplier presents documents that comply exactly with the terms (shipment, inspection, clean on-board B/L, and so on). It is slower and costs bank fees on both sides, which is why it suits larger orders and newer relationships rather than small trial runs. If you use one, have the terms drafted by someone who reads UCP 600 — most disputes come from documentary errors, not fraud.

Platform escrow — useful, with limits

Marketplaces such as Alibaba offer Trade Assurance, where the platform holds your payment and releases it against agreed milestones. It adds real protection for newer relationships, especially small and mid-size orders. The limits: coverage rules are the platform's, dispute handling has its own calendar, and large custom orders often outgrow its scope. Use it as a floor, not a full risk strategy.

The rule that outranks all of the above

Pay only the company on the business license, into its own corporate account. Before wiring anything, match three names: the company on the license you verified, the company on the quotation and contract, and the beneficiary name on the bank account. If any two differ, require a written explanation you find acceptable. A request to pay a personal account or an unrelated third party is one of the clearest red flags in this trade, whatever the reason given.

Payment structure is only half the protection — the other half is having something defined to inspect against before the balance is due. If you want a second pair of eyes in China for that step, tell us what you are ordering and we will tell you what we can and cannot check on the ground.