The payment method determines more than how money moves. It determines who carries the risk between order, production, shipment, document release, delivery, and final acceptance.
For the currencies, rails and controls that sit underneath each method, start from the China Payments hub.
Deposit and balance payment
Many manufacturing orders use a deposit before production and a balance before shipment or after inspection. The percentages vary by supplier, product, bargaining power, and relationship.
The importer should connect each payment to a contractual milestone. Examples include production start, completion, passed inspection, delivery of shipping documents, or shipment confirmation.
A payment schedule might read:
Contract signed
v
Production deposit
v
Manufacturing and inspection
v
Balance payment
v
Shipment and document delivery
The commercial risk is obvious: if most of the price is paid before shipment, the importer has limited leverage after the money leaves.
Cash in advance
Cash in advance offers the supplier strong protection against buyer nonpayment. It is less attractive to the importer because funds are released before the importer controls the goods. The US International Trade Administration notes that cash in advance is secure for the exporter but can make the seller less competitive.
Open-account terms
Under open account, the supplier ships and invoices the importer for payment at a future date. This improves the importer's working capital but shifts nonpayment risk to the supplier. It is generally more realistic after the parties have developed trust, credit history, and reliable dispute processes.
Letter of credit
A letter of credit is a bank commitment to pay when specified documentary conditions are satisfied. It can reduce counterparty risk, but it introduces banking fees, document requirements, deadlines, and the risk of discrepancies.
The bank deals with documents, not the physical quality of the goods. A compliant document presentation does not prove that the machinery works or the products meet commercial expectations.
Documentary collection
In a documentary collection, banks exchange shipping documents against payment or acceptance, but they do not guarantee payment in the same way as an issuing bank under a letter of credit. The method is generally more appropriate for established relationships than for an untested supplier or buyer.
Escrow and platform arrangements
Escrow can reduce risk when the release conditions, custodian, governing law, and dispute process are credible. Marketplace or platform protections should be reviewed carefully; marketing language is not a substitute for understanding who legally holds the funds and when they can be released.
Choosing the method
Evaluate:
Relationship history
Product customization
Inspection options
Shipment and title documents
Transaction size
Country and legal risk
Supplier bargaining power
Cost and availability of trade finance
Consequences of delay
Ability to recover funds after a dispute
Request a payment-terms review
Provide the contract, production cycle, payment milestones, shipment terms, inspection process, amount, and supplier history. The purpose is to align the payment mechanism with the commercial risk rather than merely find the fastest transfer.
Related guides
Last reviewed: 1 October 2026.