Sending money to a supplier you've never met, in a country where legal recourse is complicated, is one of the trust jumps that makes new importers nervous. The good news is there's a set of standard practices that experienced buyers use — and once you know the logic behind them, the structure becomes pretty intuitive.
The Standard Split: 30% Deposit, 70% Balance
The most common payment structure for custom-manufactured goods from China is a 30% deposit before production, 70% balance before shipment.
Why this split? It gives the supplier enough cash to buy materials and start work (most factories don't have the capital to front a production run on your behalf), while keeping the majority of your money in your pocket until the goods are finished and verified.
The balance is typically released after:
- Production is complete
- You (or a third-party inspector) have confirmed the goods pass quality checks
- The supplier provides a copy of the packing list and commercial invoice
If you've done a pre-shipment inspection, this is the moment where that inspection report matters. Don't release the balance if the report fails and the supplier hasn't corrected the issues.
Payment Methods — What Each One Actually Protects
Wire Transfer (T/T — Telegraphic Transfer)
T/T is the most common method for China trade. It's fast, cheap (usually $15–$40 per transfer), and familiar to Chinese suppliers. The downside is that it offers you almost no recourse once the money is sent. If the supplier disappears or delivers garbage, wire transfer gives you no chargeback mechanism.
Use T/T with suppliers you've vetted properly and have a track record with.
Letter of Credit (LC)
An LC is a bank guarantee: your bank promises to pay the supplier once they provide documents proving they shipped the correct goods (matching invoice, B/L, packing list, etc.). The bank is the intermediary — the supplier only gets paid if the paperwork checks out.
LCs offer real buyer protection, but they're expensive ($500–$2,000+ in bank fees), slow (2–4 weeks to set up), and require both you and the supplier to have relationships with cooperating banks. They make sense for large orders — typically $50,000+ — where the protection justifies the cost.
Escrow
Some platforms offer third-party escrow for B2B trade — your money is held by a neutral party and released to the supplier only after you confirm receipt and quality. Alibaba's Trade Assurance is the most widely used version of this in China trade.
Escrow is good for small, first-time orders with new suppliers. The catch: it only works within supported platforms, and the dispute process can be slow and frustrating.
PayPal / Credit Card
Possible for very small orders, but most Chinese manufacturers don't accept them for production runs because of high fees and chargeback risk. You might find it on Alibaba for samples. For any real purchase order, stick to T/T or LC.
What About Trading Terms Like "100% Upfront"?
Some suppliers — especially smaller factories or traders — ask for 100% payment before production. This is a red flag with a new supplier, full stop. Established manufacturers don't need it. If a supplier insists on full upfront payment for your first order:
- Ask why. A plausible reason is that the materials are highly specialized and non-refundable.
- If you proceed, keep the order small enough that losing it entirely wouldn't be catastrophic.
- Verify them first — business license, factory audit, third-party verification service.
For context: reputable, export-oriented Chinese factories deal with 30/70 splits every day. It's standard. A factory that's never heard of this structure is either very new to exporting or not the kind of operation you want.
Negotiating Better Terms as You Build Relationships
Payment terms aren't fixed. As you develop a track record with a supplier:
- You can push toward 20/80 or even 10/90 splits
- Some suppliers will extend 30, 45, or 60-day payment terms on the balance (essentially trade credit)
- A few large buyers negotiate 0% deposit after establishing trust — though this is rare unless you're giving substantial volume
What helps you negotiate:
- Consistent order volume
- Fast payment history (pay your balances promptly — it matters)
- Long-term relationship signals (sharing your growth plans, placing repeat orders)
Red Flags to Watch For
- Personal bank accounts instead of corporate accounts — payment going to an individual rather than the registered company is a major warning sign
- Pressure to pay the full amount immediately, "or the price changes tomorrow"
- Bank account registered in a different country than the supplier (common in fraud)
- Supplier asks for payment via Western Union or cryptocurrency for a manufacturing order
- Invoice details that don't match the formal quotation or proforma
Before wiring any significant amount, verify the bank account with the supplier over a second communication channel — phone or video call. Invoice fraud (where someone intercepts your email and swaps in different bank details) is a real and common scam in international trade.
For the full picture on sourcing and vetting suppliers safely, see how to vet a China supplier and forwarder.
Ready to ship once the deal is agreed? Compare freight lanes from China to plan your logistics before the order is placed — not after.