How to Pay Chinese Suppliers Safely: T/T, Trade Assurance, PayPal, L/C
A supplier asks for 100% payment up front and offers a 5% discount for the favour. Take that deal and you've just handed away the only real leverage you have as an importer sitting 9,500 km from the factory. How you pay a Chinese supplier matters more than almost any clause in your contract, because once your money leaves New Zealand, getting it back is genuinely hard.
Here's how we structure payments — and which methods suit which order sizes.
The golden rule: never pay more than 30% up front
For a standard bank transfer order, the worldwide convention is a 30% deposit to start production and the 70% balance paid only after your pre-shipment inspection passes and the goods are released for shipment.
That unpaid 70% is your leverage. If the inspection finds faults, the supplier will rework the goods — not out of kindness, but because he's still waiting for most of his money. Pay everything early and a defect claim becomes a polite request he can ignore.
A supplier who insists on 100% up front is a hard red flag. He's either in financial trouble or setting up a scam. Every legitimate factory accepts 30% T/T or a letter of credit. Walk away.
The four main methods compared
T/T (telegraphic transfer / bank wire). The workhorse. Medium risk — you have little recourse if things go wrong, which is exactly why the 30/70 split exists. Our recommendation for first-timers on orders of roughly US$1,000–20,000. Your NZ bank will charge an international transfer fee, and the supplier will usually quote in US dollars, so watch the NZD/USD rate when you time the payment.
Trade Assurance / escrow (Alibaba). A third party holds your money until you confirm the goods arrived as agreed, with neutral dispute mediation if they didn't. Very safe, and the default choice when you're buying through Alibaba anyway. For small trial orders this is the closest thing to a safety net a new Kiwi importer can get.
PayPal. Fairly safe for the buyer — good protection and easy chargebacks. That's precisely why suppliers dislike it: withdrawal hassles, fees and chargeback exposure sit on their side. Many will accept it only for samples or small lots, sometimes adding the fee to your price. Fine for small amounts; don't expect it on a container order.
Letter of credit (L/C at sight). The bank releases funds only when shipping documents prove the goods were dispatched as specified. Both sides are protected, and the supplier can even use the L/C draft to finance raw materials. The catch: it's complicated and costly to set up through your bank, so it only makes sense on orders of about US$20,000 and up. Talk to your bank's trade finance team before you promise a supplier an L/C.
Western Union deserves its own warning: it's cash to a stranger with zero guarantee. Only ever use it with people you know well — which, for a new supplier, is nobody.
A useful escrow trick for small bulk buys
Found the product on AliExpress? Message the seller, negotiate a bulk price, then have them adjust an AliExpress order to that agreed price and pay through the platform. You get wholesale-ish pricing with AliExpress escrow protection wrapped around the deal. It's a tidy way to test a product at 50–200 units without T/T exposure.
Keep the paper trail (the IRD will thank you)
From day one, keep digital copies of every invoice, payment confirmation and receipt. You'll need them for disputes, for claiming import GST back once you're GST-registered (remember: NZ GST is 15%, and registration kicks in at NZ$60,000 turnover), and for the email from four months ago that proves what was agreed. Track sample payments separately too — most suppliers will deduct sample costs from your first order, but only if you agreed it up front and actually remember to claim it.
Match the method to the moment
- Trial order under ~US$2,000 through a platform → escrow / Trade Assurance.
- First real order, US$1,000–20,000, direct with the factory → 30/70 T/T, inspection before the balance.
- US$20,000+ → letter of credit.
- Long-standing relationship → you can eventually negotiate softer terms, even balance-on-delivery, for cash-flow breathing room. Earn that; don't start there.
Key takeaways
- Never pay more than 30% before production; release the 70% balance only after a passed inspection.
- A demand for 100% upfront payment is a walk-away red flag, every time.
- Use escrow for small platform orders, 30/70 T/T for mid-size orders, L/C above ~US$20,000.
- File every invoice and payment record — for disputes, and for claiming back your 15% import GST.
Related: Pro-Forma Invoices and Purchase Orders: Paperwork That Protects You, Import Scams and Red Flags: How Kiwis Get Burned (and How Not To)
