Payment Methods for Chinese Suppliers: Safe Options Ranked

How you pay your Chinese supplier determines how much you can recover if things go wrong. Some payment methods give you real protection. Others hand all the power to the supplier the moment you click send.

Here’s an honest ranking of every major payment method, from safest to most dangerous.

The Standard Deposit Structure

Before getting into payment methods, understand the standard payment structure in China sourcing.

The norm is 30% upfront, 70% before shipment.

You pay 30% to start production. The supplier orders materials and begins manufacturing. When production is done and passed inspection, you pay the remaining 70% and the goods ship.

The 30/70 split exists because it’s a reasonable balance of risk. The supplier gets enough to cover materials without working entirely on credit. You retain enough leverage (the 70%) to ensure the supplier delivers before getting paid in full.

Never pay 100% upfront to a supplier you don’t have a strong track record with. And always hold that 70% until after a pre-shipment inspection passes. More on inspections in the quality control guide.

#1: Alibaba Trade Assurance (Safest for Alibaba Orders)

Trade Assurance is Alibaba’s escrow system. When you pay through it, your money goes into an account Alibaba controls. The supplier receives it only after you confirm the goods arrived as described, or after a set dispute window passes.

What it covers: If goods don’t match the order description in terms of quantity, quality, or on-time delivery, you can file a dispute and get a full or partial refund.

What it doesn’t cover: Trade Assurance won’t help if your product spec was vague, you accepted goods without inspection, or the dispute falls outside covered categories. Read the terms.

Cost: No extra fees for buyers. Suppliers pay a small commission.

Best for: First orders with new Alibaba suppliers, any order where you can’t verify the supplier well in advance, orders under $20,000 where a Letter of Credit doesn’t make financial sense.

Limitation: Only available for suppliers on Alibaba. Off-platform suppliers can’t use it.

Trade Assurance is the single best protection tool for importers new to China. Use it by default on Alibaba until you have a long-standing relationship with a supplier.

#2: Letter of Credit (Safest for Large Off-Platform Orders)

A Letter of Credit (LC) is a formal bank guarantee. Your bank issues a document guaranteeing payment to the supplier once they present proof that shipment conditions were met: documents like the bill of lading, commercial invoice, and packing list.

What it covers: Payment is conditional on the supplier providing correct shipping documents. If they ship the wrong goods or miss your required documentation, they don’t get paid.

What it doesn’t cover: An LC doesn’t inspect goods. A supplier can ship the right paperwork for the wrong products. LCs protect against shipping failures more than quality failures. Combine with a pre-shipment inspection.

Cost: Banks charge 0.5-2% of the transaction value, plus fees for amendments and document review. On a $50,000 order that’s $250-1,000.

Best for: Large orders ($20,000+) with suppliers you found outside Alibaba. Suppliers in regulated industries. First orders at significant dollar values.

Limitation: Complex and slow. Both your bank and the supplier’s bank must be involved. Allow 2-3 weeks to set up. Many small factories don’t have experience with LCs, which creates friction.

#3: PayPal (Good for Small Transactions)

PayPal offers buyer protection that’s familiar to Western importers. If goods don’t arrive or don’t match the description, you can file a dispute.

What it covers: PayPal’s buyer protection covers non-delivery and “significantly not as described” for eligible transactions.

What it doesn’t cover: Goods and services disputes have a 180-day window. PayPal isn’t designed for B2B trade and disputes can be hard to win. Many Chinese factories add a 4-5% surcharge to cover PayPal’s fees.

Cost: 4-5% surcharge from most suppliers. Your bank may also add conversion fees.

Best for: Small first-time transactions under $1,000-2,000. Sample orders. Buying from smaller suppliers who accept it.

Limitation: Most serious factories don’t want to use PayPal for large orders. The fees eat into already thin margins. It’s rare to find a factory willing to accept PayPal for orders over $5,000 without a significant surcharge.

#4: T/T Bank Transfer (Standard for Established Relationships)

T/T (Telegraphic Transfer) is a standard international bank wire via the SWIFT system. It’s the most common payment method in global trade. It’s also the one with the least built-in protection.

What it covers: Nothing. T/T is a direct transfer. Once it completes, the money is gone. If the supplier doesn’t ship, you’re in dispute territory with no automatic recourse.

What it doesn’t cover: Fraud, non-delivery, quality failures. You’re on your own unless you have a contract and the will to pursue legal remedies.

Cost: $15-50 per transfer from most banks. Wise (see below) is significantly cheaper. Allow 1-5 business days for the transfer to clear.

Best for: Established suppliers with 5+ successful orders. When you’ve verified the supplier thoroughly and have inspection in place. Large orders where Trade Assurance or LC isn’t available.

How to reduce T/T risk:

• Always hold 70% until after a passed pre-shipment inspection
• Verify bank details by video call before every transfer, not just by email
• Send a small test amount first if wiring to a new account
• Get your supplier’s banking details on their company letterhead

See the avoiding scams guide for detail on how fraudsters intercept T/T payments using fake bank details.

#5: Wise (Good for Reducing Fees on T/T)

Wise (formerly TransferWise) is a money transfer service that moves international payments at real exchange rates with low flat fees. It isn’t a payment protection service. It’s a cheaper way to send a wire transfer.

Cost: Typically 0.5-1.5% of the transfer amount, far cheaper than most banks.

Best for: Regular payments to established suppliers where you’ve already validated the relationship. Paying sourcing agents and intermediaries in smaller amounts.

Limitation: Same risk profile as T/T. No buyer protection built in. Wise does have fraud monitoring, but it’s not designed for B2B trade disputes. Some Chinese companies can receive Wise transfers directly, others need you to convert to a bank wire at the destination.

#6: Western Union (Avoid)

Western Union is a cash transfer service. It’s fast, it works globally, and it’s how scammers prefer to get paid. There is essentially no buyer protection, transfers complete within minutes, and they’re nearly impossible to reverse.

Don’t use Western Union to pay a supplier. Ever. If a supplier pushes Western Union as a payment method, that’s a major red flag. Walk away.

The same applies to MoneyGram and most cryptocurrency payment requests. Legitimate factory suppliers don’t need you to pay in crypto.

Choosing the Right Method by Situation

What Happens When Payment Goes Wrong

If a supplier takes your deposit and ghosts you, your options depend entirely on how you paid.

• Trade Assurance: File a dispute through Alibaba within the window. Alibaba mediates. Resolution takes days to weeks.
• Letter of Credit: Contact your bank immediately. LCs have specific conditions, and if the supplier can’t produce proper documents, they don’t get paid.
• PayPal: File an “Item Not Received” or “Significantly Not as Described” dispute. 180-day window from payment date.
• T/T: Contact your bank within hours if you realize something is wrong. Wire recalls are rare but possible in the first 24 hours. After that, your options are legal action or loss.
• Western Union: Almost zero recovery. That’s why scammers use it.

Frequently Asked Questions

What is the 30/70 payment structure in China sourcing? The standard structure is 30% paid upfront to start production and 70% paid after production is complete and passes a pre-shipment inspection. It balances risk: the supplier gets enough to cover materials, and you keep enough leverage to ensure delivery and quality before full payment.

Is Alibaba Trade Assurance actually safe? Trade Assurance is one of the safest payment options for Alibaba orders. It holds your payment until you confirm receipt or a dispute resolves. It isn’t perfect – disputes can be slow and outcomes vary – but it’s far better than sending a direct wire transfer to an unverified supplier.

Can I negotiate payment terms with Chinese suppliers? Yes, within limits. Established buyers ordering at high volume can sometimes negotiate better terms like 20% deposit or net-30 payment on shipment. New buyers almost always face standard 30/70 terms or worse. Demonstrate reliability across multiple orders before pushing for better terms.

How long does a T/T bank transfer take to reach China? Typically 1-5 business days via SWIFT. Some banks are faster, and transfers to major Chinese banks from US or European banks often complete in 2-3 days. Factor this into your production timeline so the supplier isn’t waiting on payment before they’ll ship.

What currency should I pay Chinese suppliers in? Most Chinese suppliers accept USD and prefer it. Some larger suppliers also accept EUR or CNY (Chinese yuan). Paying in USD avoids the supplier adding a currency conversion surcharge. Your bank will handle the conversion on your end.

Is a Letter of Credit worth the trouble for small orders? Probably not. LC setup costs $250-1,000 in bank fees and takes 2-3 weeks. For orders under $15,000-20,000, Trade Assurance or a well-structured T/T with inspection provides similar protection at lower cost and complexity.