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How to Pay Your Chinese Suppliers

If you order goods for your eCommerce store or business from China, you’ll be familiar with how much of a headache making payments to your suppliers can be. 

Because China has strict capital controls, and in modern times, has been engaging in international trade for about twenty years, sending money to China can be complicated and expensive. 

If you’re an SME or young business with suppliers in China, and need to find the best ways to pay them, this article will give you a short and sweet overview of five common methods, and what you need to know about each of them.

First things first, you should know that there are typically two stages to paying your Chinese suppliers:

  • Deposit is usually 30% of the full amount. This is paid before they start production, to secure your order. 
  • The remaining 70% is then paid once the order is complete. 

That means there are typically two payments you’ll have to make per order. This is something to keep this in mind (as fees can add up!) when thinking about which method is the best for you.

Here are five common ways to pay your suppliers in China: 

1. Make an international wire transfer from your bank 

This is the most straightforward way to pay your suppliers in China. If you already have a business bank account, you don’t have to set up anything else in order to process this payment. 

Most of the time you can simply head into your bank branch (or through your bank’s e-banking portal) and make the transfer right there. 

In general, bank wires are the normal business practice. Especially when it comes to smaller scale factories, this is the method of payment they’re most familiar with and prefer.  

When making the wire transfer, in general, you should have the following information ready about your order:

  • Reference number on invoice
  • Payment amount on invoice
  • Date of the order
  • Quantity of goods you’ve ordered (for example, if you’re having watches created, and are ordering 1,000 units, you must specify 1,000)
  • Name of the company handling the shipment

This may not, however, be an exhaustive list of details you need to provide. In general, because capital controls are strictly enforced in China, transferring money into the country requires a lot of information about why you’re making the transaction in the first place. 

What’s more, in terms of fees, be prepared to pay anywhere from $20-50 USD in flat fees, and a multiple of that in conversion fees for each payment. These charges can come from: 

  • International transfer fees from your bank
  • SWIFT correspondent bank fees
  • Currency conversion fees 
  • Fees from the receiving bank 

2. Set up a business account in Hong Kong and send funds as a local transfer

In order to avoid international transfer fees and delays, what a lot of Western businesses do is set up a business account in Hong Kong and pay their suppliers from there. 

Many Chinese suppliers actually have business accounts in Hong Kong, due to the ease of transferring money in and out of Hong Kong (as there are no capital controls in Hong Kong). What’s more, because a lot of the time they do business with Western companies, it’s quite normal for them to deal in USD. 

So if you and your Chinese supplier both have USD accounts in Hong Kong, sending payments is as simple as sending a local transfer. That means you avoid: 

  1. foreign exchange conversion fees
  2. international transfer fees 
  3. logistical complications when it comes to sending money into China

Especially when you take into consideration that you’ll likely be making two payments per order (first, the initial deposit, then the remaining amount) transferring locally might be the best way to avoid the headache of international transfers.

While setting up a bank account isn’t the easiest to do in Hong Kong (to say the least), there are other FinTech alternatives that can help. Built for cross-border entrepreneurs, Neat offers online incorporation and business account set up, which you can do overseas (transfer fees are also much lower!) Check out our incorporation package here.

3. Use Alibaba Trade Assurance

Some suppliers from China have been known to be a little hit or miss. Sometimes, if you haven’t been extremely clear about what you want, you might end up with something very different. 

If you haven’t worked with a supplier before, you might get more peace of mind comfortable by using something like Alibaba Trade Assurance

To put it simply, Alibaba Trade Assurance works like this: 

You wire the money to Alibaba, and they keep it in escrow. Once you’re happy with the final products, they’ll release the funds to your supplier. In the event that the product is subpar, you can withhold your payment, or even retrieve the amount from escrow. 

While this system is attractive to many Western businesses, most Chinese suppliers won’t accept this payment method. To use this to facilitate payment, Alibaba takes a cut of their profits. Typically, it’s only the larger and well-established Chinese suppliers that’ll use this.

4. Remit the payment through a specialised remittance company

For SMEs and young businesses, bank fees can add up. An alternative popular with SMEs is to send money through a third-party remittance company, such as Western Union or Lianlian Pay. 

These companies typically don’t use the SWIFT network, so a lot of the time you don’t have to deal with as many hidden fees. Typically, the way remittance companies keep their fees low works like this: 

Most of these remittance companies have their own bank accounts and funds available in various jurisdictions, and process transfers locally.


For example, if you’re sending money from the UK to China, you can send British pounds to the remittance company in the UK. That company will then accept the Pounds into their British bank account. Simultaneously, they will transfer the equivalent in RMB from their RMB account in Mainland China to your beneficiary in China.

However, as many remittance companies available in the West are still largely not well-known in China, most Chinese suppliers (especially the smaller ones) aren’t always willing to accept payment this way. 

5. Transfer funds from your PayPal account to theirs 

While PayPal isn’t super popular amongst consumers in China, it’s still a viable option many businesses opt for, especially because it feels familiar to a lot of Western entrepreneurs. 

The initial 30% deposit is often remitted through PayPal. 

If your Chinese supplier has a PayPal account, you can send funds straight from your account to theirs. These transfers are usually instant. 

Once again, however, most Chinese suppliers aren’t too keen to use PayPal. This is because while it may be a convenient option for you, PayPal charges extremely high fees to transfer money to China. It’s not easy for a supplier in China to get their money out of their Paypal account either. They’ll have to use a third-party payment service in order to remit funds into their Chinese bank account. This withdrawal step can take up to 2 days and also comes with conversion and withdrawal fees. 

So what’s the best way to pay your Chinese suppliers? 

In general, while you do have multiple ways to pay a Chinese supplier, at the end of the day, a wire transfer is still the most straightforward and so the most popular. It’s really only the larger and more established factories that will have the flexibility to support other payment methods – especially when it comes to working with Western providers, like PayPal.  

If you have an established relationship with suppliers and are making regular payments (or plan to be doing so), setting up a business account in Hong Kong to facilitate payments is going to save you a lot of time and money even in the short term. 

If you’re looking for a solid provider for a multi-currency account in Hong Kong, check out Neat Business, which allows you to make payments to your suppliers’ Hong Kong accounts or Chinese accounts. The application is fully-digital (no visits to a branch – we promise!) and accounts can be opened within a week. Learn more here!

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