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Paying Chinese Suppliers Safely: TT, LC and Escrow Compared

Solutions
Jul 6, 2026
Woman holding a credit card and using a laptop to make an online payment, illustrating paying Chinese suppliers

Paying Chinese suppliers is the moment where a smooth sourcing deal can quietly turn into a disaster. The goods might be perfect. The factory might be honest. Yet the money still has to travel thousands of miles into an account you have never seen. So the real question is not just “how do I send it” — it is “how do I send it and actually get what I paid for”. This guide walks the main payment methods side by side, the usual deposit-and-balance split, and the small verification habits that stop fraud before it starts.

The Methods, Ranked by Safety

Start with the shape of the landscape. When paying Chinese suppliers, you have roughly five routes, and they are not equal. Some protect you. One or two mostly protect the seller. Here is the quick map before we dig in.

  • Bank wire / T/T (telegraphic transfer) — fast, cheap, universal, but no built-in buyer protection once it lands.
  • Escrow / Trade Assurance — a neutral third party holds the cash until you confirm the goods. Strong protection.
  • Letter of Credit (L/C) — a bank guarantees payment against shipping documents. Best for large orders.
  • PayPal — convenient for small samples, but fees are high and many factories refuse it.
  • Western Union / MoneyGram — a genuine red flag for a manufacturing order. Avoid.

Notice the trade-off running through the list. The easier and cheaper a method is to send, the less it protects you afterwards. So match the method to the size of the risk, not just the size of the invoice.

Bank Wire and T/T: The Default

Most factory orders settle by bank wire, which suppliers usually call T/T — a telegraphic transfer straight from your bank to theirs. It is the workhorse. A wire is fast and, per the U.S. International Trade Administration, “the most secure and preferred cash-in-advance option for exporters” (International Trade Administration, n.d.-a). Read that carefully, though. It is the safest option for the seller, because the money is essentially gone once it clears.

That is why the same agency is blunt that paying fully in advance is “the least attractive option for the buyer” (International Trade Administration, n.d.-a). You carry all the risk. So a wire is fine for a supplier you have vetted and worked with — and it pairs badly with a first-time, unverified factory. If you have not done the homework yet, our guide on how to vet Chinese suppliers is the step that belongs before any money moves.

The 30/70 Deposit Split

Here is the convention almost every factory expects: a deposit up front, the balance later. The classic split is 30% deposit to start production, then 70% before the goods leave the port. Sometimes it is 40/60, or 50/50 for a new relationship. The logic is fair. Your deposit funds the raw materials; their shipment earns them the balance.

But use that structure as leverage. Do not pay the final 70% blindly on the supplier’s word that production is done. Pay it after an inspection confirms the goods are right. Timing that balance to a pre-shipment check is one of the strongest tools a buyer has, which is exactly why China order quality control and the payment schedule need to be planned together, not separately.

Escrow and Alibaba Trade Assurance

Escrow flips the risk in your favour. A neutral third party holds your money and only releases it to the supplier once you confirm the order arrived as agreed. On Alibaba.com, this is branded Trade Assurance, the platform’s official free buyer-protection service. Your payment “will be held in escrow and will only be released to the supplier after you manually confirm receipt of the order”, giving you time to inspect and, if needed, open a dispute (Alibaba.com, n.d.).

There is one catch worth repeating. The protection only exists if you pay through the platform. A supplier who agrees to a Trade Assurance order, then asks you to wire the deposit to a private account “to save fees”, has just walked you outside the safety net. That request should stop the deal cold. For a new supplier or a mid-sized order, escrow is often the smartest way of paying Chinese suppliers, because it costs little and buys real leverage.

Letters of Credit for the Big Orders

When the invoice runs into five or six figures, the letter of credit earns its keep. An L/C is “a contractual commitment by the foreign buyer’s bank to pay once the exporter ships the goods and presents the required documentation” (International Trade Administration, n.d.-b). Your bank, not you, guarantees the payment — and only against correct shipping documents. The supplier gets certainty; you get a paper trail and a gatekeeper.

It is not free, though. The ITA notes L/Cs are “labor-intensive and relatively expensive due to bank fees”, and a tiny discrepancy in the documents can trigger delays (International Trade Administration, n.d.-b). So reserve this method for large or first-time high-value deals. Talk to your bank early about costs and the exact documents required. For anything routine and modest, an L/C is overkill.

PayPal, Western Union and the Red Flags

Two more methods, and a clear line between them. PayPal is genuinely useful for small stuff — samples, a $200 test order — because it offers some buyer recourse. The downsides are real fees and the fact that many factories simply will not accept it for production runs.

Western Union and MoneyGram are a different story. Those services are built for sending cash to people you know. They offer you no buyer protection at all, and the transfer is effectively irreversible. So when a “supplier” pushes you toward Western Union for a bulk order, treat it as a warning sign, not a payment option. Legitimate factories deal in company bank accounts and platform escrow — not untraceable cash pickups.

Company Account, Not Personal

This single rule prevents a lot of grief: pay the company, never a person. A legitimate Chinese manufacturer invoices from, and receives money into, a corporate bank account whose name matches its business licence. If the beneficiary on the payment details is an individual’s personal account, stop and ask why.

Sometimes there is an innocent-sounding reason — tax, a “trading company” structure. Often there is not. A personal account breaks the paper trail and makes any later claim far weaker. So insist the account name matches the registered company you agreed to buy from. Understanding how these China business bank account structures work makes the mismatch easier to spot.

Currency: USD or RMB?

Most export invoices are priced in US dollars, and paying in USD is usually simplest. Some suppliers, though, quote in RMB (the onshore yuan, CNY) or its offshore version, CNH. Paying in the supplier’s own currency can sometimes shave a little off the price, since they no longer carry the exchange risk.

Just watch the exchange rate and your bank’s conversion margin — that spread is where costs hide. Agree the currency in the contract, and confirm which side pays the intermediary bank fees. Small print, real money — and a routine part of paying Chinese suppliers cleanly.

Stopping the Fraud That Actually Hits Buyers

The scam that catches careful importers is rarely a fake factory. It is a redirected payment. Criminals hack or spoof an email thread and, right before you pay the balance, send “updated” bank details. You wire the 70% to the fraudster. This is Business Email Compromise, and the FBI calls it “one of the most financially damaging online crimes”, tied to over $43 billion in exposed losses worldwide (Federal Bureau of Investigation, 2022).

The defence is simple and non-negotiable. Verify bank details out of band. Do not trust an email alone.

  • Treat any last-minute account change as fraud until proven otherwise. A sudden “use this new account instead” message is the number-one red flag.
  • Confirm details by a second channel. Call a known phone number, or check on the Trade Assurance platform — never reply only to the email that changed them.
  • Match the account name to the business licence you verified when you vetted the supplier.
  • Send a tiny test transfer first on a large wire, and confirm receipt before releasing the rest.

None of this is paranoia. It is the routine that keeps paying Chinese suppliers boring — which is exactly what you want it to be.

Where This Fits in Your Sourcing Journey

Payment sits near the end of the sourcing chain. Here is what surrounds it.

Frequently Asked Questions

What is the safest way of paying Chinese suppliers?

For most orders, escrow such as Alibaba Trade Assurance is safest, because a third party holds your money until you confirm the goods. For very large deals, a letter of credit adds bank-backed protection. A plain bank wire is fine only with a supplier you trust.

Is a 30% deposit normal?

Yes. A 30% deposit with 70% before shipment is the standard split. New relationships sometimes use 50/50. Whatever the ratio, try to tie the final payment to a pre-shipment inspection rather than the supplier’s say-so.

Should I ever pay a personal bank account?

No, treat it as a red flag. Pay the company account whose name matches the registered business licence. A personal beneficiary breaks the paper trail and weakens any future claim, so ask questions before you send anything.

The supplier emailed new bank details — is that safe?

Be very careful. Sudden account changes are the classic sign of Business Email Compromise fraud. Verify the new details through a separate, known channel — a phone call or the trading platform — before paying, and never rely on the email alone.

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