Overview

The most common payment term in China trade is T/T (telegraphic transfer), usually "30% deposit + 70% balance." The risk concentrates in the entire period before the balance: you pay the deposit, then the factory delays, downgrades quality, swaps goods, or never ships — while you're forced to pay the balance first to get your goods, only to find them defective.

How It Works

  1. Attitude shift after the deposit — warm before payment, then delivery keeps slipping and replies slow down once the deposit clears.
  2. Balance-pressure — "no balance, no shipment" forces you to pay the remaining 70% before seeing the goods.
  3. Losing leverage after full payment — once paid in full, the factory stops caring about quality, delivery, or after-sales.
  4. Worst case — the factory takes the deposit and vanishes.

Why It's Harmful

  • Capital tied up — your full payment sits in the factory's hands; you lose all negotiating and recourse leverage.
  • Irreversible loss — cross-border recovery is extremely difficult; even a court win is hard to enforce.
  • Psychological trap — having "already sunk 30%," you're reluctant to walk away and get squeezed further (price hikes, product swaps).

Red Flags

  • Demand for 50% or even 100% prepayment.
  • Payment requested to a personal or offshore account.
  • Refusal of any guaranteed channel (Trade Assurance, L/C).
  • Aggressive urgency, fabricating "limited stock."
  • Price that is abnormally low, aimed at a fast close to collect a deposit.

Solutions

1. Use a guaranteed channel (preferred)

  • Alibaba Trade Assurance — buyer's money is held in escrow by the platform; disputes over delivery/quality can be appealed for a partial refund.
  • Letter of Credit (L/C) — bank credit intervenes; you pay only against compliant documents. Safest for larger orders.
  • PayPal / credit card — dispute mechanisms for small orders.

2. Keep the deposit low

  • For first orders, aim for ≤ 20%, with 30% as the ceiling.
  • Tell them: "20% for the first order; we'll revisit terms for repeat business."

3. Stage payments tied to milestones

Design a payment schedule such as:

  • 30% deposit (after signing)
  • 30% after production is complete and inspection passes
  • 30% against a copy of the Bill of Lading
  • 10% after goods arrive and pass destination inspection

4. Retain the balance + quality retention

  • Hold back a portion (e.g., 5–10%) as a quality-retention guarantee, paid only after goods pass inspection at destination.
  • Contractually allow defect claims to be deducted from the balance.

5. Inspection before payment

  • Require a third-party pre-shipment inspection to pass before paying the balance.
  • Make the inspection report a contractual precondition for payment.

Tools & Resources

  • Alibaba Trade Assurance rules
  • Bank international department (for L/C opening process and fees)
  • Third-party inspection: SGS, BV, TÜV, Intertek

Key Takeaway

The core principle: money and goods must never be out of your control at the same time. Either use platform/bank escrow, or strictly stage payments and tie each payment to a verifiable milestone (inspection passed, Bill of Lading received). Never pay in full without a guarantee.