How to Pay Chinese Suppliers: T/T, L/C, Escrow & the 30/70 Rule
14 min read · Published September 14, 2026 · By the CN Ally sourcing team
Every payment method for China sourcing compared — wire transfers, letters of credit, Trade Assurance, PayPal — plus the deposit structures that actually protect you.
The payment landscape: what your options actually are
Paying a Chinese supplier is not like paying a domestic vendor. You are sending money across borders, often in a foreign currency, to a company you have never met, for goods that do not exist yet. Every payment method is a tradeoff between cost, speed, and protection — and the right choice depends on order size, relationship history, and how much risk you can afford.
The five methods that cover 95% of China sourcing payments are: T/T bank wire transfer (the industry standard), letter of credit (for large orders), Alibaba Trade Assurance / escrow-style online payments (for platform orders), PayPal and international cards (for samples and small amounts), and money transfer services like Wise for mid-size payments. Each has a natural habitat, and using the wrong one — say, wiring $50,000 with zero protection instruments — is how importers learn expensive lessons.
Two principles govern everything below. First, never pay 100% upfront to a supplier you have not worked with — the standard structure exists for a reason. Second, the account name you pay must match the supplier's registered business license exactly. A request to pay a different company, a personal account, or an offshore account you were not told about is a red flag until proven otherwise.
- Five main methods: T/T wire, letter of credit, Trade Assurance/escrow, PayPal/cards, Wise-style transfers.
- Never pay 100% upfront to a new supplier — use staged payments.
- Beneficiary name must match the business license. No exceptions.
T/T wire transfer and the 30/70 split
T/T (telegraphic transfer) is a plain international bank wire — the workhorse of China trade. Your bank sends USD (or EUR/GBP) to the supplier's bank in China, typically arriving in 1-3 business days. Fees run $25-50 on your side plus $15-30 in intermediary bank charges; the supplier's bank may deduct a small receiving fee too. For orders above a few thousand dollars, it is the cheapest method per dollar moved.
The standard structure for a new supplier relationship is 30% deposit to start production and 70% balance before shipment — critically, after your pre-shipment inspection passes. That balance payment is your single biggest piece of leverage in the entire transaction: once it is sent, your ability to force rework evaporates. Tie the 70% explicitly to inspection acceptance in your contract, and mean it.
As trust builds, terms evolve. Established relationships commonly move to 20/80, and strong long-term partners may offer OA (open account) terms like net-30 after shipment — effectively supplier credit. Do not expect OA terms in year one; do negotiate the deposit percentage down as your order history grows. Also confirm who absorbs bank fees: "OUR" (you pay all fees) versus "SHA" (shared) changes the received amount, and suppliers notice short payments.
- T/T: 1-3 business days, ~$25-50 in fees — cheapest for orders over a few thousand dollars.
- Standard new-supplier terms: 30% deposit, 70% balance after inspection passes, before shipment.
- Confirm fee arrangement (OUR vs SHA) so the supplier receives the full expected amount.
Letters of credit: maximum protection, maximum paperwork
A letter of credit (L/C) is a bank guarantee: your bank promises to pay the supplier once they present compliant shipping documents (bill of lading, commercial invoice, packing list, inspection certificate if required). If the supplier ships garbage, they still get paid only if the documents comply — which is both the strength and the weakness of L/Cs. They protect against non-shipment, not against poor quality hidden behind correct paperwork.
L/Cs make sense for orders above roughly $50,000-100,000, for buyers whose finance departments require them, and for high-risk jurisdictions or brand-new relationships at scale. Costs are meaningful: expect 1-3% of order value in bank fees, plus the administrative burden of document compliance — a misspelled port name or a one-day date mismatch can cause a "discrepancy" that delays payment and triggers amendment fees.
For most small and mid-size importers, L/Cs are overkill. The combination of a 30/70 T/T split, a pre-shipment inspection, and a verified supplier gives you comparable practical protection at a fraction of the cost and hassle. Use L/Cs when the order size or your internal policy demands them, not as a default.
- L/C = bank guarantees payment against compliant documents. Best for $50k+ orders.
- Protects against non-shipment, NOT against poor quality behind correct paperwork.
- Costs 1-3% of order value plus real administrative overhead.
Trade Assurance and escrow-style protection
Alibaba's Trade Assurance is the closest thing to escrow in China sourcing: you pay Alibaba, Alibaba holds the funds, and releases them to the supplier when you confirm receipt (or after an inspection you arrange). If the supplier fails to ship on time or the goods do not match the agreed specification, you can file a claim for a refund. Coverage is only as good as the order terms you set up — vague specifications mean weak claims.
The catch: Trade Assurance only covers orders placed and paid through Alibaba's platform, and many suppliers quote slightly higher prices for Trade Assurance orders to cover Alibaba's transaction fees (typically 2-3%). It also caps practical protection at the order value — it will not compensate for your lost selling season. Still, for first orders under $20,000 with a new supplier, it is the best protection-to-hassle ratio available.
Set up Trade Assurance orders carefully: upload your detailed product specification and inspection standard into the order, set the shipping deadline with buffer, and choose the inspection option that holds funds until your inspector approves. A Trade Assurance order with "standard" terms and no spec attached is barely better than a wire.
- Trade Assurance holds your payment until you confirm receipt or inspection passes.
- Only covers on-platform orders; suppliers often add 2-3% for the fees.
- Upload your full spec and inspection terms into the order — vague terms = weak claims.
PayPal, cards, and transfer services for smaller amounts
PayPal is fast and familiar, which makes it ideal for samples ($20-200) and very small orders — but it is a poor choice for bulk payments. Fees run about 4.4% plus a fixed fee for cross-border commercial payments, and PayPal's seller/buyer protections are weak for custom manufactured goods. Many suppliers also dislike PayPal because funds can be frozen or reversed. Use it for speed on small amounts, never for a $10,000 production deposit.
Wise (formerly TransferWise) and similar services (OFX, Airwallex for business) have become the smart middle ground for payments between roughly $500 and $20,000. They offer near-mid-market exchange rates with transparent fees (often 0.5-1%), deliver to Chinese business accounts in 1-2 days, and cost far less than PayPal. For importers paying regular mid-size invoices, the FX savings alone justify the setup.
Credit cards through Alibaba or supplier payment links work for small orders and give you chargeback rights, but expect 3-4% processing surcharges and low limits. Western Union and similar cash services have no place in B2B supplier payments — no paper trail, no protection, and any supplier who insists on them is telling you something.
- PayPal: fine for samples, terrible for bulk (4.4% fees, weak protections, freeze risk).
- Wise/Airwallex: best value for $500-$20k payments — near-mid-market FX, 1-2 day delivery.
- Never use cash-transfer services for supplier payments — no trail, no protection.
Currency, FX, and invoicing details
Most China export trade is invoiced in USD — it is the default quote currency and what Chinese exporters' bank accounts are set up to receive. EUR and GBP are also common. Some suppliers offer CNY (RMB) pricing, which can be 2-5% cheaper because it avoids their FX conversion costs, but paying CNY requires either a Chinese entity or a transfer service that supports CNY to business accounts (Wise and Airwallex both do, with limits).
Watch the FX spread, not just the fee. A bank wire with a "$35 fee" can quietly cost you 2-3% in an unfavorable exchange rate if you are converting from your local currency. For regular importers, this dwarfs every other payment cost: on $200,000 of annual purchases, a 2% FX improvement is $4,000 back in your pocket. Compare the total received amount, not the headline fee.
On invoicing: always get a proforma invoice (PI) before paying the deposit, showing the supplier's full registered name, bank details, product description, quantities, unit prices, total, Incoterm, and payment schedule. After shipment, the commercial invoice must match the PI and the actual goods — customs in your country will compare them. Keep every payment confirmation; if a dispute ever reaches a bank or a court, your paper trail is your case.
- USD is the default invoicing currency; CNY pricing can save 2-5% if you can pay it.
- Compare total FX cost (rate + fee), not just the headline transfer fee.
- Get a detailed proforma invoice before every deposit; keep all payment confirmations.
Protecting yourself: the payment safety checklist
Payment fraud in China sourcing usually is not a stranger stealing your wire — it is subtler. The classic is the email compromise: you receive a message "from your supplier" with new bank details, often timed right before your balance payment. Counter it with one rule: never change payment details based on an email alone. Confirm by phone or video call using a number you already have, and confirm the beneficiary name matches the business license.
Build protection into the deal structure, not just the method. Staged payments (30/70) mean the most you can lose to a disappearing supplier is the deposit. Inspection-before-balance means you pay the majority only for verified goods. Written specifications mean disputes have a reference point. Each layer is cheap; together they make fraud and failure expensive for the other side.
Finally, keep payment discipline as you scale. It is tempting, after five smooth orders, to start paying 100% upfront for a "better price" or to skip the inspection to save $300. Every experienced importer has a story about the order where they relaxed and got burned. The system works because it is systematic — the day you make an exception is the day you needed it.
- Verify any bank-detail change by phone/video on a known number — email compromise is the #1 payment fraud.
- Structure is protection: staged payments + inspection before balance + written specs.
- Never relax the system for a 'trusted' supplier — exceptions are when losses happen.