How to Pay a Chinese Supplier: T/T and L/C

Your first order usually reaches the same moment. The supplier sends a proforma invoice — a bill sent before production starts — and you have to send money to a company you have never met, in a country you may never have visited.

Most losses at this point are small and boring. The bank account name does not match the contract. The payment has no reference, so nobody can find it later. You pay the balance before anyone inspects the goods. Or you send a small amount to a personal account, and later the supplier cannot claim the export tax refund, and you have no paper trail.

This page explains the payment methods Chinese suppliers actually ask for. It tells you what each one costs, where each one breaks, and what to do in the first 24 hours after you send money to the wrong account. It assumes you already have the proforma invoice. If you are still working out how to buy from China at all, start with our complete sourcing guide.

Which payment method fits your order?

Pick the method by the order size. Small orders need speed. Large orders need a bank in the middle.

These bands are a guide, not a rule. A US$80,000 order from a supplier you have used for five years does not need a letter of credit. A small order from a company registered three months ago may, if the risk is high enough.

Before you pay: what four things must match?

• The legal name. Four names must be the same company: the name on the proforma, on the contract, on the bank account, and on the Chinese business licence. Ask for a photo of the licence, then compare it with the National Enterprise Credit Information Publicity System. A company that bills under one name and collects under another is the most common warning sign in Chinese B2B payments.
• The bank details, checked by phone. Bank details arrive by email, and email is where they get swapped. Call a number you already had — not the number in the email that carries the new details — and read the account number back to them. If the supplier has no phone contact at all, that tells you something.
• The payment reference. Put the proforma number and the contract number in the reference field. Money with no reference becomes an unallocated receipt, and that is how "we never got your deposit" arguments start.
• What the price includes. FOB, CIF and DDP put different costs on different sides. If you pay "the invoice" without knowing whether freight, insurance and import duty are inside it, you find a 20% gap at the port. Our customs and duty guide shows who pays what.

What does T/T cost, and where does it break?

T/T is a bank-to-bank wire. Your bank sends money to the supplier's bank, usually as a SWIFT MT103 message. Nobody holds the money in the middle. Once it is credited, your bank will not take it back because you changed your mind.

1. The supplier sends a proforma with five things: beneficiary name, account number, bank name, SWIFT/BIC code and bank address.
2. You check the name against the contract and the licence.
3. You tell your bank the amount, the currency, the beneficiary and who pays the fees.
4. Your bank sends the MT103. A middle bank may step in when the two banks have no direct link.
5. The supplier's bank credits the account, usually in one to three business days.
6. You ask the supplier for the bank receipt with the value date, and you keep it with the invoice.

• What it costs. Three parts: your bank's fixed fee, the exchange-rate mark-up, and fees from middle banks or the supplier's bank. On transfers under about US$2,000, the fixed fees can pass 2% of the amount. On large transfers, the exchange-rate mark-up costs most. Ask your bank for the all-in number before you send.
• The fee codes matter. `SHA` means you share the fees: the supplier gets the amount minus what banks in the chain deduct. `OUR` means you pay every fee, so the full invoice amount arrives. `BEN` means the supplier pays. If the invoice says "net amount received", choose `OUR` or expect a shortfall.
• What goes wrong. Three failures: a beneficiary name that does not exactly match the account, a payment routed through a bank under sanctions or compliance review, and a reference that never reaches the supplier's finance team.
• If you want a credit-card chargeback, you cannot use T/T. A chargeback is a dispute mechanism the card networks give the cardholder. It applies to card transactions only; a bank wire has no equivalent. If you need that right, order on a platform where you can pay by card.
• If you do not want a large advance sitting unprotected, use a letter of credit or a documentary collection. Both put a bank between you and the supplier: the bank works with documents, and the money moves when the documents are right. You already know the L/C. A documentary collection is cheaper, but the bank does not promise to pay — it follows the seller's instructions and releases the documents once the buyer pays or accepts a draft. If the buyer does not pay, the bank is not liable.
• If your bank's compliance team holds the transfer, use another bank or move to a platform. A bank can delay or freeze a cross-border payment while it runs a compliance review. That decision belongs to the bank, not to the supplier, and it can keep the money after you have sent it.

Is a letter of credit worth it?

A letter of credit — an L/C — is your bank promising to pay when the supplier shows the right papers. It is worth considering from about US$20,000 on a first order. Below that the bank fees take too big a share of the amount: on a US$5,000 trial an L/C costs more than it protects.

• When it fits. A new supplier, a first order above roughly US$20,000, or a supplier who will not take a large advance. Below that, the fees and paperwork cost more than the risk they remove.
• Who does what. Your bank issues the L/C. A bank in China advises it. The supplier ships by the latest shipment date and presents documents. The bank reads the documents, not the goods. Under UCP 600 — the ICC rules that govern most credits — the bank has five banking days after presentation to examine and decide (ICC, UCP 600, checked 27 October 2026). Clean documents get paid. Documents with errors are refused, and the bank lists every error.
• Why credits fail. A paper fails, not the goods. Common ones: the supplier name spelled two ways on the invoice and the bill of lading; a shipment one day after the latest date; a missing certificate; insurance below the required percentage; a description copied word for word in one document and reworded in another. Banks check documents "on their face" and never look at the goods (ICC, UCP 600, checked 27 October 2026).
• What it costs. An issuing commission (often charged per quarter), a confirmation fee if a second bank adds its promise, amendment fees and discrepancy fees. Get the fee list before you promise a supplier an L/C.

Platform, PayPal or cash transfer: what do they actually protect?

Each one protects a small payment. None of them protects a production deposit.

• Platform escrow. On Alibaba and similar sites, you pay the platform, and the money is released when you confirm delivery or after a set period. That only covers orders placed and paid on the platform. Send a bank transfer "to save the platform fee", and the protection is gone. Read the current terms; the rules and dispute windows change.
• PayPal. Common for sample fees and small accessory orders. Two costs: the supplier often adds 3–5% to cover PayPal's fee, and the currency conversion uses PayPal's rate, not the bank rate. Buyer protection is built for consumer disputes. On custom-made goods, "not as described" is hard to prove when nobody wrote the specification down.
• Western Union and MoneyGram. Cash networks: the receiver collects with an ID and a reference number. They are fast and need no bank account. They also leave no paper trail that a bank will accept as proof of payment for customs or tax. Use them for a small sample fee to a supplier you have already checked, and for nothing else.

Why refuse a personal account?

When a supplier asks you to pay a company order into a personal WeChat, Alipay or bank card account, say no. The reason given — tax, speed, convenience — does not change the answer.

Three things break at once. You get no company tax invoice (in China, a fapiao) and no company to sue. The supplier cannot easily book the money as an export receipt, and China's export tax refund rules need the exporter to receive foreign exchange by the refund declaration deadline. The tax authority can suspend the refund when it finds "payment by a party other than the importer" (State Taxation Administration Announcement No. 30 of 2013, checked 27 October 2026). Big personal receipts also run into China's personal foreign-exchange rules: one person can buy and sell the equivalent of US$50,000 a year without extra paperwork, and anything above that needs supporting documents (SAFE, Implementation Rules of the Measures for Personal Foreign Exchange Administration, checked 27 October 2026).

A supplier who insists on a personal account for a company order has just told you how they will handle a quality claim.

Deposit and balance: where is the real risk?

The deposit holds your place in the production line. The balance is your last lever, so pay it after you have seen the pre-shipment inspection record and the packed cartons.

• 30/70 before shipment. Simple and standard. Once you pay the balance, you have no lever left. Cover that with an inspection before the balance and a written packing list.
• 30/70 against the bill of lading copy. The supplier ships first and gets paid when they show the B/L copy. That protects your timing, not your quality: a copy of the B/L is not the goods.
• Letter of credit at sight. The bank pays against documents. That protects how you pay, not what you get, unless the L/C itself asks for an inspection certificate.

Our own term is simpler: 100% T/T in advance, written on the proforma before you pay anything. If that does not fit your deal, we say so before we quote — our sourcing service in Yiwu explains how we work.

Sample fee: how do you keep the deduction on paper?

Paying for a sample is normal. The mistake is agreeing the deduction by phone. Ask for a proforma that lists the sample fee and the freight separately, plus one line saying the sample fee will be taken off the order payment once the order is placed. Pay the sample to the same company account as the order. When you confirm the order, deduct it at the balance stage and show the deduction on the commercial invoice, so the customs value and the payment record match.

Paid the wrong account: what do you do in the first 24 hours?

Speed decides the outcome. A recall sent the same day can still work. A recall sent after a week usually cannot.

1. Call your bank's payments desk now. Ask for a recall or an amendment. Give them the MT103 reference, the amount, the value date and the beneficiary details. Banks can send a recall the same day; after a few days the money is usually gone.
2. Ask your bank to call the supplier's bank. That bank will call its customer. If the money is still in the account and the holder agrees, it can come back. No bank can take money out of a customer's account without consent or a court order.
3. Check the instruction by a second route. If the bank details came by email, treat that mailbox as hacked until you know otherwise, and call the supplier on a number you already had.
4. Report it. In China, call 110. Anywhere else, file a report with your local police and give them the Chinese account. Once a criminal case is open, banks can freeze the receiving account quickly.
5. Keep everything. Emails with headers, chat logs, the invoice, the transfer receipt, the record of your call back.
6. Do not pay a "release fee". A second demand to unlock the first payment is the standard follow-up scam.

You may get the money back. You may not. Checking the account before you send is worth more than any recall after.

Which five signals mean stop?

Two of these five together are enough to stop the transfer and check the company again in the official records.

1. The account name differs from the company name on the contract or licence.
2. Bank details change in the middle of an order, especially by email.
3. The only way to reach them is email: no phone call, no video call, no company address.
4. You are asked to pay a third party — "our finance company", "our Hong Kong agent", a person.
5. Urgency: the price expires today, the manager is leaving, the production slots are closing.

Do-this checklist

1. Confirm the supplier's legal name in the National Enterprise Credit Information Publicity System.
2. Compare the licence name, the contract name, the invoice name and the bank account name — all four must match.
3. Call a known number and read the account number back.
4. Read the proforma invoice for Incoterm, currency, amount, bank charges and validity.
5. Write the PI number and contract number into the payment reference.
6. Ask your bank for the all-in cost: fee, FX spread and intermediary charges.
7. Choose SHA or OUR deliberately; do not let the default decide.
8. For orders above roughly US$20,000, get an inspection before releasing the balance.
9. Keep the sample-fee deduction in writing on the PI.
10. Never pay a company order to a personal account.
11. Save the MT103 and the supplier's bank receipt with the invoice.
12. After sending, ask the supplier to confirm receipt in writing within two working days.

Related reading

• Import Duties and Customs from China: HS Codes
• China Sourcing Guide for Beginners: MOQ & QC
• What does a China sourcing agent do

Related products

• Sourcing service in Yiwu
• Power tools

Sources

• ICC Academy — Evolution of UCP 600 and its impact on documentary credits — https://academy.iccwbo.org/trade-finance/article/evolution-of-ucp-600-impact-on-documentary-credits/ — checked 2026-10-27. "UCP 600 implemented 1 July 2007; five banking days for examination; documents examined 'on their face'."
• State Taxation Administration — Announcement No. 30 of 2013 — https://www.chinatax.gov.cn/chinatax/n810341/n810765/n812146/201306/c1081349/content.html — checked 2026-10-27. "Refund requires foreign-exchange receipt; suspended where 'payment by a party other than the importer' is suspected."
• SAFE — Implementation Rules of the Measures for Personal Foreign Exchange Administration — https://www.safe.gov.cn/tianjin/2024/0430/2464.html — checked 2026-10-27. "Annual quota of US$50,000 equivalent per person."
• ICC — Incoterms® 2020 — https://iccwbo.org/business-solutions/incoterms-rules/incoterms-2020/ — checked 2026-10-27. "Eleven rules; allocation of costs, carriage, insurance and export/import formalities."

For a quote or to source your products, contact our Yiwu sourcing team → Request a quote