How to pay a Chinese supplier safely
Ways to pay a Chinese supplier: bank transfer, letter of credit, escrow. How staged payment works, why you must not pay to a personal account and how to guard against bank-detail swaps.
Payment is the moment money is most often lost. The goods are not yet made, but the money has already left your account — and it matters critically that it goes to the right recipient on the right terms. Mistakes here cost from several thousand to tens of thousands of dollars and are very hard to recover: most factories operate under Chinese jurisdiction, which is practically inaccessible to a foreign buyer without local lawyers.
Below is the mechanics of safe payments to China: schemes, instruments, and rules that work in practice.
How can you safely pay a supplier in China?
Bank transfer (T/T — telegraphic transfer)
The most common method. Money goes directly to the supplier company’s bank account via SWIFT. Convenient, fast, costs $20–50 per transfer. Buyer protection depends entirely on the payment scheme and contract terms — T/T itself does not protect against a dishonest factory.
Letter of credit (L/C)
An intermediary bank pays the supplier only after a set of documents is presented: bill of lading, invoice, packing list, and if required a certificate of inspection. Reliable for large deals. Downsides: opening an L/C costs 0.5–1% of the amount, takes 3–7 business days, and not all small factories work with it. Justified for first contracts of $100 000+ with an unverified supplier.
Escrow / secured deal
A platform (e.g. Alibaba Trade Assurance) holds the payment and releases it to the supplier only after receipt confirmation. Good for first small orders up to $10 000–15 000. Less common at large production volumes — suppliers with solid reputations prefer direct transfers.
Can payments to a Chinese factory be split into stages?
Transferring 100% upfront in one shot is the most common mistake on a first factory deal. The standard safe scheme for production orders:
| Stage | Payment | Condition |
|---|---|---|
| Contract signing and launch | 30–40% | Specification-locked order |
| Mid-production (optional) | 30–40% | Intermediate inspection photos |
| Pre-shipment inspection | 30–40% | Inspection report with no critical defects |
Tying the final payment to the inspection is the key lever. The factory knows: if the batch fails acceptance, the last tranche will not arrive. This motivates them to keep to the specification and fix issues before shipment, not after.
Email interception: the most common money-loss scheme
The Man-in-the-Middle (MitM) scheme works like this: a fraudster hacks or spoofs the email of one party and, just before the final payment, sends a message with “updated bank details”. The recipient sees the familiar sender and familiar thread. The money goes to the fraudster’s account; the real factory has no idea a transfer was made.
According to the FBI IC3, in 2023 Business Email Compromise (BEC) fraud cost companies $2.9 billion — and China procurement is among the top targets.
The defence is simple and mandatory: any change of details received by email or messenger must be confirmed in person — by video call or phone call to the factory manager’s previously known number.
Iron rules for payments to China
- Pay only to the company account whose name matches the contract. Payment to an individual’s account = red flag.
- Reconcile details against the contract before every payment — do not copy from the latest email; check the original contract.
- Confirm any change of details through a different channel — not the same email/messenger thread where the “new” message came from.
- Do not transfer 100% upfront to an unknown supplier — use the staged scheme.
- Fix payment terms in the contract: amounts, currency, timelines, link to inspection.
- Require invoice and packing list before the final payment — verify SKUs and quantities.
Comparison of payment instruments
| Instrument | Buyer protection | Cost | Best for |
|---|---|---|---|
| T/T with staged scheme | Medium / high | Low ($20–50) | Main instrument for all volumes |
| Letter of credit (L/C) | High | 0.5–1% of amount | Large first deals from $100K |
| Escrow / Trade Assurance | High | 2–3% | First small orders up to $15K |
| 100% T/T upfront | None | Low | Verified long-term partners only |
Mini-case: how a bank-detail swap cost $34 000
A company ordered a batch of restaurant furniture from Foshan — contract, samples, and production all went smoothly. Three days before the final $34 000 payment, the factory “manager” wrote on WhatsApp: “Our bank changed its correspondent; here are the new details.” The payment was sent. The real factory wrote a week later asking why payment hadn’t arrived.
It turned out the manager’s WhatsApp account had been cloned. The money was not recovered. The factory shipped the order only after a second full payment — which was legally justified because their side of the contract had been fulfilled.
The rule that would have stopped the loss: call the manager by voice and confirm the details verbally.
Checklist before every transfer
- Is the recipient a company account, name matching the contract?
- Are the details reconciled against the original contract — not the latest email?
- If details changed — confirmed by voice call?
- Is payment split into stages, final tranche tied to inspection?
- Invoice and packing list with correct SKUs received?
If even one point is in doubt — do not transfer until it is clear. Delaying a payment by one day is cheaper than losing $30 000+.
Don’t want to risk it on payment? Dream View works under a contract with staged payment and pre-shipment inspection — the payment is tied to the result, not to promises. More on our quality control — how we control quality. Free consultation: orders@dreamviewchina.com, +66 80 942 2230.
Frequently asked questions
How do you pay a Chinese supplier safely?
Work under a contract with staged payment: 30–40% deposit to start production, the balance after a successful pre-shipment inspection. Pay only to the company bank account matching the contract name. Confirm any change of details through a separate channel — a video call or phone call to a known number.
What are the standard staged-payment terms for Chinese factories?
The most common scheme: 30% deposit on contract signing + 70% balance after pre-shipment inspection. For large projects a three-stage scheme is sometimes used: 30% / 40% on production completion / 30% before shipment. Exact shares are fixed in the contract.
Can you pay to a Chinese supplier's personal account?
No. Payment to an individual's personal account instead of the company account is a classic sign of fraud. A legitimate factory always receives payments on a corporate account matching the legal entity name.
What currency do you pay Chinese factories in?
Most often in US dollars (USD). Some larger factories accept CNY — usually at a more favourable rate but requiring a corporate account. Confirm the currency, bank fees, and who bears them — all into the contract.
What is the Man-in-the-Middle scheme in payments to China?
A fraudster intercepts the email correspondence and at the right moment — just before the final payment — sends an email "from the supplier" with new bank details. The money goes to the fraudster's account. The only defence: confirm any change of details personally by video call or phone call to a previously known manager's number — never by replying to the same email or message thread.
Is a letter of credit needed for payments to China?
An L/C is justified for deals of $100 000+ with an unknown supplier or on a first large project. For regular orders with an annual volume of $100 000+, a contract with staged payment and inspection provides sufficient protection at lower administrative cost.