Payment Methods Used by Importers to Pay Chinese Suppliers

2021-11-17

插图1.jpgNew importers must choose the most cost-effective method to send money to China to their suppliers. After reading several horror stories on the internet, these importers are particularly concerned about how to send money to China with the safety of their finances. When importing from China, or any country for that matter, there is no "Best" payment methodology, and the best way to send money to China is based on several elements, the most important of which is the payment quantity.

Sending a huge amount of money to someone you've probably never met is a slightly scary, if not impossible, step. Although most Chinese suppliers prefer direct transfers, this may still not be the safest method. Even if you have a reliable service, you appear to be dying with expenses. Fortunately, we've constructed a list of transactions and put a dozen different services to figure out the cheapest way to send money to China and to save pennies on your next purchase. 

Different Payment Methods used to Send Money to Chinese Suppliers

Wise 

Consider using Wise if you need to make frequent transfers to your Chinese suppliers. Wise's international payments are often less complicated than other payment methods. Simply register, pay in your local currency, and submit your supplier's bank information. It's equivalent to receiving money in their bank account for them. It's also widely accepted.

If you worry about certain risks involved in online transactions, then you can combine Wise payments with written agreements, native agencies, or deposits to manage the risks involved. To get your Wise account set up for sending money to China, you must register first. Once you've completed those transfers, you'll only have to pay a little charge. You are not charged any hidden fees due to low exchange rates. All transactions are completed at the mid-market rate, which can be found on Google. Wise is six times less expensive than other alternatives. You'll notice that you save a lot of money even on the tiniest of transactions. 

Telegraphic Transfer (T/T)

This is the most frequent and best way to send money to China, and it is widely accepted by providers. However, there are dangers on both sides. Suppliers can usually charge a deposit to lessen their risk, which will subsequently increase the buyer’s cost. The higher the deposits the more difficult it is to sell products. As a result, it's preferable if you and your provider have a good working connection. That high price includes the written cost, most likely multiple fixed SWIFT fees from negotiator banks, and thus, you’ll get a lower rate of exchange than you'll see with an online currency converter.

Escrow

Escrow protects both parties – buyers and suppliers. It indicates that you pay before delivery, but the funds are managed by a third party. They won't be sent to the provider until you've received your order. Despite its popularity in China, acceptance for foreign transactions is still uncertain. If you shop on Alibaba, then you may still be offered payment through the Alipay written agreement.

The purpose of a written agreement is to reduce risk due to the extended time between placing an order and receiving it. However, there will still be differences, and sometimes it is difficult to get the conflict resolved and get the team to work in your favour. You will be charged 5% of the contract when you send money to China. They're initially charged to the supplier, but they'll be passed on to you.

Escrow is useful for low-value transactions. However, because of the additional cost and the fact that it will keep your money for some time, it is better to shift them on larger purchases.

Letter of Credit (LC)

Larger Chinese suppliers and international companies are usually happy and relieved to accept LCs. Some might be able to put them into practice. However, because of the complexity and language obstacle, small and medium-sized suppliers are often hesitant to accept this method of payment. LCs reduce the supplier's risk of non-payment by the client. As a buyer, LCs also give you the peace of mind that the provider can amend the terms at any point in time. This helps them to set their terms during large transactions. 

However, the rates are overpriced, and so it is not the cheapest way to send money to China and the work is slightly complicated. As a result, it's critical to get professional advice with your initial transactions. Letters of Credit are actually a high priced item. They're usually reserved for really large transactions or when suppliers make it a condition of doing business. 

Sourcing Organizations

As mentioned above, written agreements for overseas transactions are hardly accepted by Chinese suppliers. However, acceptance is much higher if importers make a deal through a local Chinese sourcing agent. As a result, some importers engage native sourcing agencies by signing a partnership agreement with them. As long as there is transparency in the dealings, the risks involved are less. 

A reliable agency will work for the importer. They can reject the products provided by the supplier after inspection and retain the amount made under the stated agreement. Obviously, this adds cost to the transaction. The cost of an agency is more than the 5% fee charged in an Escrow transaction because here a whole organization is involved. They will be doing all the extra work for you. However, sourcing agencies are good for small transactions if you are willing to pay a little more to prevent risk. It is considered as the best way to send money to China.

PayPal

Initially, there weren’t many Chinese suppliers who accepted PayPal, but with time the acceptance is growing. It's becoming increasingly popular for little transactions. The service isn't that popular because suppliers share stories on the internet about sudden fund recollections. Despite PayPal's focus on the safety of buyers’ money, there are still significant risks involved. Their protection policies are cutting-edge, especially when it comes to overseas transactions. If there is any dispute, then it will take time to process your claim, and you may be unsuccessful.

Fees are calculated on a percentage basis, and there are few rates of exchange costs. PayPal is a convenient way to pay if you're shopping for little quantities or samples. However, the fees will rise with the rise in quantity. PayPal could be useful for low-value transactions, but serious traders will find it far too expensive.

Western Union

Western Union is often accepted for small or medium transactions. It's popular among suppliers because it's quick, user-friendly, and inexpensive. Still, there are some risks involved. There is less security while transferring money. You should not send money to China via West Union if you don't know or trust your supplier.

Even though the fees are comparatively low, you'll end up paying more for your merchandise. This is because West Union earns money through a rate of exchange marked for buying Chinese currency. They charge you more for Chinese money than their published conversion rate indicates. Unfortunately, you cannot see their rate of exchange calculator, unless you don’t sign up and create an account.

International Debit/Credit Cards

Recently, a few technology companies have agreed to accept card payments. The risks are less for buyers but comparatively more for suppliers. Scam buyers will cost the supplier a lot of money. As a result, cards are less used for doing business among Chinese suppliers. Fees are costly, and suppliers can pass them on to you. Card payments are not only less popular with providers, but also expensive for many customers. 

插图2.jpgCash Payment

Money is important to every supplier, and it is widely accepted in many ways in China. Importers who deal in money with their suppliers get discounts from their suppliers as well. However, dealing in cash is highly risky. There's hardly any protection if you're unhappy with your product. You'll still have to pay costs, especially the cost of any exchange transaction. Not only that, but you'll have to keep an eye out for hidden fees in the exchange rate.

The Best Way of Sourcing From China Without Risking Money

If you wish to source from China, then one of the first things that come to mind is the risk involved. When sourcing from any area, there is a chance that the contract will go bad and money will be wasted, but this risk will be more in China.

We have compiled a list of the most effective strategies for you –

Say No to Suppliers That are Fishy in Any Sense

It's difficult to understand the situations under which people might transmit money to someone they've never met. However, without experience, it is difficult to analyse any threat. 

First, while sourcing from Alibaba or other websites, stay away from unverified, unpaid Chinese suppliers. This means stay away from all free accounts, unrestricted accounts, and any account that appears to be relatively simple to set up. If a service fails to pass the crucial test of setting up a professional, paid account, something is wrong. 

Second, read or request paperwork from any possible provider regularly. At least, you should see a copy of their company license. You may also want to look over any specific documentation linked with the product or service you're purchasing from them. If they can't show you the requested documents, then you should avoid such suppliers. 

Verify if the Supplier is Registered

It is critical to double-check all documents provided by the supplier. Simply go to the organization that approved those documents and confirm with them if the documentation and records on file match exactly with yours. The procedure looks simple, but it is difficult and requires considerable knowledge of both technology and the Chinese language. 

Still, verifying a Chinese provider is necessary, before you send money to China to the supplier. If a supplier's official registration cannot be verified, then it is best to avoid them. If it'll be verified, then you'll move on to the next step of verifications.

Verify Supplier’s Bank Account

Along with verifying registration documents, a trader should ensure that they require an authorized business account and that relevant information is given. The bank account license is a document that can help you with this, and it is available to all Chinese businesses.

The business account license proves that the account belongs to a specific company and that it is a business account that has been properly registered with the authorities. You should always make payments to business accounts shown in the license and not into any other account provided by the supplier. 

Confirm Business Type and Scope

The name and range of a Chinese supplier's business registration are important. As the Chinese company names are required to meet certain criteria, you can use them to figure out what type of business you're dealing with. However, many Chinese factories also set up and operate their own registered business enterprises to enable trade without using third parties.

By looking at a company's business scope, you can confirm what services it is registered to provide. Examine the expression carefully to ensure that the company is allowed to do what it wants with the products within its range. 

Verify Supplier’s Business Establishment Date

Viewing a Chinese company's registered capital and establishment date might also help in gaining a lot of information about the supplier. If the company's registration shows that it was created a long time ago, there isn't a lot of information required to collect because its tenure builds trust between supplier and importer. 

However, if the company was founded recently and has a large amount of registered capital, then this can ring an alarm. You'll also notice that businesses claim to have been in operation for longer than their registration indicates. 

This information (company kind, scope, formation date, and capital) could be vital while dealing with suppliers since you'll be able to immediately compare their statements with their official records. 

Initiate Inspections

Many organisations that source from China fail to conduct work audits and inspections throughout the process. However, frequent audits, as well as inspections, are necessary during the sourcing process. When you reach the level of initiating audits and inspections by sending auditors and inspectors it means you've already into the validation technique. That doesn't mean you can sit back and rest. Onsite work is what ensures that all of the extra verification work wasn't a waste of time. 

Don’t Quote Too Low price

Importers attempting to source from China frequently make the mistake of pursuing low pricing to the point where the supplier either rejects the deal or reduces the product quality by compromising on material or man force. Even while Chinese vendors are willing to give some goods cheaper, the link between price and quality applies everywhere.

Remember, the supplier needs to make a profit, which means that if you bring them good business, you'll be more likely to have priority in their production schedule, employee allocation, etc. 

Sign a Contract

Finally, what you need to understand is how important it is to acquire a contract, and to have it in Chinese. This isn't a guarantee that things will go smoothly for you, but it's an added benefit and protection that you should consider. A contract's main benefit is to prevent things from going wrong in the first place. You'll consider a responsibility to use the contract, and ensure that everything is laid out properly.

It additionally shows that you're serious about the purchase and are dedicated, which aids in both discouraging low-quality suppliers and extending credibility to trustworthy ones.

插图3.jpgChina ISO 9001 Certificate

When dealing with Chinese companies, the China ISO 9001 certificate is a common certification that indicates that the company's quality management system has been certified. A certifying authority issues this certificate to a company to certify that its quality management system satisfies the requirements of ISO 9001. It's one of the most frequently requested documentation from Chinese suppliers. All ISO 9001-certified Chinese companies receive English and Chinese forms of a certificate.

The ISO 9001 certificate is particularly useful in determining whether the certification is: 

  • Real 

  • Appropriate 

  • Granted by a reputable organisation

It is difficult to search for Chinese suppliers in the manufacturing sector that have an authentic ISO 9001 certificate, particularly if they're exporting in Western countries. Therefore before you plan to send money to China it is always wise to follow all the above-mentioned verification procedures. Always, remember, language may be a barrier, but when a Chinese supplier is willing to do business with you, they will try their best to cooperate with all requests you make. 

Now that you know how to look for authentic Chinese suppliers and how to send money to China through various payment methods, it is no big deal to start immediately. Initially, a novice might panic, which is okay but show patience. Gradually you will reach a point where you get the right supplier that matches your needs.

To become successful, all businesses should appreciate supplier relationship management. Improve your compliance method to buy from preferred suppliers. Even if the world is connected, different countries and states have different laws and terminology. Following the best practice will help in saving every penny which goes to the profit line.

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