The Five Main Payment Methods
1. Telegraphic Transfer (TT)
Wire transfer, usually through your bank. Most common for mid-size orders.
Standard structure: 30% deposit by TT + 70% balance by TT after pre-shipment inspection. Pros: Fast (2-3 days), accepted by every factory, low fees on large orders. Cons: Irreversible once sent; no built-in dispute mechanism.2. Letter of Credit (LC)
Bank-backed payment; buyer's bank guarantees payment upon supplier meeting specific documentation requirements.
Used for: Orders $50K+, especially with new factories. Pros: Strong buyer protection, supplier can't withdraw funds without meeting document requirements. Cons: Bank fees ($500-$2,000), slower (7-14 days), complex documentation.3. Alibaba Trade Assurance
Platform-managed payment; Alibaba holds funds in escrow until buyer confirms receipt.
Pros: Dispute-resolution built-in, covered by Alibaba's protection program. Cons: Alibaba fees 2-3% on transaction, only works on Alibaba.com (not 1688).4. Alipay B2B (for 1688)
China's dominant digital payment system extended to cross-border B2B for smaller orders.
Pros: Fast, low-fee for small orders, Alipay dispute resolution. Cons: Limited to smaller orders (<$5K typical), requires Alipay account, some factories still prefer TT.5. Credit Card / PayPal
For small test orders or samples.
Pros: Instant, strong buyer protection for payment disputes. Cons: 3-4% fees, many factories refuse or charge back the fee, limited to samples.The Standard 30/70 Structure
Most China B2B transactions follow this pattern:
- 30% deposit on order confirmation — gets the supplier to reserve materials and start production
- 70% balance after pre-shipment inspection — released when goods are ready and inspected
Advantages:
- Supplier has skin in the game (70% unpaid until goods ready)
- You hold leverage (balance payment) until QC passes
- Balance pre-shipment means you don't pay for goods that ship and fail
When to Negotiate Different Structures
First order with a new factory
Consider LC or 30/70 with strict PSI before balance.
Very small orders (<$2,000)
Simple 100% upfront TT or Alipay B2B; not worth the friction of split payments.
Repeat orders with a trusted factory
Loosen to 20/80 or net-30 days.
Tight cash flow / large volume
LC at sight with 60-90 day terms can extend your cash cycle meaningfully.
Red Flags
- Supplier demanding 100% upfront with zero QC step
- Asking to wire to a personal bank account (not the company)
- Using a different company name than the Alibaba listing
- Changing payment instructions mid-deal (often sign of email hacking)
Common Mistakes
Wiring to a Hong Kong account without verifying
Many legitimate factories have HK subsidiaries, but fraudsters exploit this. Verify that the HK entity matches the factory's Alibaba profile.
Sending balance before PSI
Kills your leverage if quality is off.
Paying off-platform
If you were offered a discount to pay off-platform, you lose Trade Assurance protection.
Exchange Rate Considerations
For USD payments to Chinese suppliers:
- Suppliers typically quote in USD but receive CNY after conversion
- Exchange-rate moves can affect repeat orders' effective price over months
- Large buyers sometimes hedge; small ones usually don't
Catalayer's Role
[Sourcing Agent](/sourcing-agent) includes payment-terms templates for the main negotiation patterns. Catalayer doesn't process payments directly; you pay the supplier through whichever method you agree.
Key Takeaways
- 30/70 TT is the most common structure for mid-size orders
- LC is the strongest buyer protection for large orders
- Alibaba Trade Assurance covers platform-paid orders only
- Alipay B2B is best for small 1688 orders
- Never send balance before PSI
- Verify HK subsidiary details before wiring
See also [/glossary/trade-assurance](/glossary/trade-assurance).