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How to pay suppliers in China?

Last updated: 16 July 2024

Learn the different ways to pay suppliers in China and the risks and costs involved with each

Key Takeaways

Always perform due diligence when you are partnering with a new supplier
The top methods to pay suppliers in China include bank transfers, escrows, credit/debit cards, and multi-currency accounts
With a multi-currency account like WorldFirst, you can pay interbank suppliers with low transaction fees and at interbank exchange rates
WorldFirst offers a fast and secure way to pay suppliers on 1688.com

Introduction

Dealing with suppliers based in China can seem daunting when your business is located in Australia and you have never met them face-to-face. There are a lot of factors to consider, including product quality, international shipping, and supplier payments.

The payment method you choose for international transfers must be fast, secure, and cost-effective. The transfer fees and currency exchange rates shouldn’t cut through your already razor-thin profit margins.

Let’s look at the different payment methods online sellers can use to pay suppliers in China.

Before you pay suppliers: Top tips to ensure credibility

Always perform due diligence when you are partnering with a new supplier. Review the supplier’s information to reduce any risks related to fraud, scams, or low-quality products.

Here are a few tips to ensure supplier credibility:

Find suppliers from reliable sources: The easiest way to find suppliers is to check some of the leading B2B marketplaces in China, like 1688.com and Alibaba.

These online marketplaces list products offered by Chinese suppliers with details about their factories, turnaround times, and previous order fulfillment performance. You can also check reviews left by other buyers.

Request product samples: When sourcing products for the first time from a new supplier, always request a product sample to assess the quality before placing a bulk order.

Evaluate the factories: Visit the supplier’s factory in person or hire a third-party inspection service to assess the products and facilities thoroughly. Marketplaces like 1688.com inspect selected suppliers on their platforms and provide detailed reports on them.

Check the supplier’s background: Look into the supplier’s reputation, previous customers, Chinese business license, and overall online reputation.

Send money to a business account only: Experienced and reliable suppliers in China have a business license and a registered business bank account. If a supplier shares personal account details with you, it can be a red flag.

Partner with a sourcing agent: You can also hire a sourcing agent to manage the entire product sourcing process on your behalf. They can find suppliers, check product quality, negotiate prices, and manage shipping.

Different ways to pay suppliers in China

1.Bank transfers

You can choose to pay Chinese suppliers directly through your bank account. While it may seem like a straightforward and secure process, there are some downsides to direct bank transfers.

Banks can be slow when you are sending international payments. It can take anywhere between a few days to a week for a foreign remittance to get cleared. There is a transaction fee for international transfers, which can vary depending on the type of currency and mode of transfer.

Banks also add their margin to the live currency rates. This means you might end up paying high fees even for small transactions.

Before making any transfer, check your bank’s international transfer fees and ensure you can protect your profit margins. If you are barely making any profit after paying the product costs, shipping costs, and bank transfer fees, then you may want to look at other alternatives.

2. Escrow

Escrows are offered by limited B2B marketplaces like Alibaba to provide additional protection to international buyers.

Alibaba’s Trade Assurance payment service offers a secure way for international buyers to place orders with suppliers and protect themselves against unforeseen circumstances.

When you pay for an order, the payment is held in escrow by Alibaba and it is only released to the supplier after you confirm you have received the products in good condition.

In case of a dispute or an issue, Alibaba assists in reaching a resolution through refunds or compensation.

But escrow payments limit you to the suppliers on the Alibaba marketplace who are a part of the Trade Assurance program. Alibaba also charges payment processing fees and currency conversion fees that depend on the mode of payment and your base currency.

3. International credit or debit cards

Some Chinese suppliers can share payment links so that you can make credit card or debit card payments. You can also use credit cards on B2B marketplaces like Alibaba.

Although international card payments are not allowed on 1688.com, you can pay 1688 suppliers through WorldFirst Cross-border pay instead.

The obvious issues with international credit or debit cards are the high transaction costs, markup fees, and currency conversion rates that can quickly decrease profit margins.

4. Secure multi-currency accounts

A multi-currency account allows you to send, hold, and receive funds in various foreign currencies without opening separate bank accounts for each currency.

With a multi-currency account like WorldFirst, you can pay suppliers in China like they are just around the corner.

One World Account lets you set up local currency accounts in 15+ currencies, including GBP, USD, CAD, EUR, AUD, NZD, and CNH. Local currency accounts are created under your business’s name. For every currency, you get a separate account number and branch code.

Businesses can send payments in 40 currencies and get access to interbank/ mid-market exchange rates.

With a World Account, you can:

Pay suppliers faster: Send same-day or next-day payments at competitive interbank/mid-market rates (Cut off times apply)

Securely pay 1668 suppliers: WorldFirst Cross-border Pay is the only way to make international payments to suppliers on 1668.com

Protect your profit margins: Lock-in exchange rates for up to 24 months through forward contracts

No hidden fees: Transparent and competitive transaction fees to collect, convert, and manage funds in multiple currencies

Instant payments: Payments are free and instant between World Accounts

Security-first: WorldFirst safeguards customer funds in segregated accounts with leading financial institutions. It offers real-time fraud monitoring and your login is secured with two-factor authentication via the Authy app

Collect from marketplaces: Collect payments from 100+ global marketplaces, including Amazon, AliExpress, Etsy, and eBay. Hold the funds to pay suppliers or withdraw funds to your bank account anytime

Open a World Account for free

Open 10+ local currency accounts with local account details
Direct CNH payments to 1688.com
Pay suppliers, partners and staff in 40+ currencies and 130+ destinations
Collect secure payments from 100+ marketplaces and payment gateways, including Amazon, AliExpress, Paypal and Shopify
Lock in currency conversion rates for up to 24 months

Disclaimer: The information contained is general only and largely our views. Before acting on the information you should consider whether it is appropriate for you, in light of your objectives, financial situation or needs. Although information has been obtained from and is based upon multiple sources the author believes to be reliable, we do not guarantee its accuracy and it may be incomplete or condensed. All opinions, estimates, mentioned products/services and referenced material constitute the author’s own judgement as of the date of the briefing and are subject to change without notice. WorldFirst shall not be responsible for any losses or damages arising from your reliance of such information.

Written by Jim Vrondas, Country Manager ANZ at WorldFirst

Based in Sydney, Jim is responsible for the WorldFirst business across Australia and New Zealand. He brings with him over 25 years of experience helping Business Owners, CFO’s and Treasury Managers overcome the challenges with cross border payments and navigating volatile foreign exchange markets.