How to discuss payment terms with a Chinese supplier: deposit, balance, and the logic of negotiation 

A conversation about payment with a Chinese supplier almost never comes down to the question of "what percentage up front." Behind the formula "30% deposit, 70% before shipment" lies the logic of distributing risk between the parties. A buyer who discusses only the number usually gets the standard answer from an export manager. A buyer who understands what that number is made up of can discuss it substantively.

Below is a breakdown of how payment terms are discussed in Chinese business correspondence and negotiations: what the standard scheme consists of, how two identically sounding words 定金 and 订金 differ, what needs to be clarified before signing, and which arguments work in this conversation and which do not.

Why payment terms are part of your negotiating position, not a technical detail

In Russian-language business habits, payment terms are often perceived as an accounting formality: the price is agreed, the volume is agreed, all that's left is to "confirm the bank details." When working with a Chinese supplier, this approach creates an imbalance. Payment is what the buyer actually controls in a deal, because almost all the other levers — production, quality control, logistics — are on the supplier's side.

The supplier, in turn, views payment terms as a way to distribute risk. The deposit covers the purchase of raw materials and starting the line: the factory does not want to invest its own working capital in an order from an unfamiliar buyer. The balance before shipment or against a copy of the bill of lading protects it from a situation where the goods have shipped but the money has not arrived.

Hence the practical conclusion: it makes sense to discuss payment not as a separate item, but together with volume, timelines, and acceptance terms. Payment terms are a function of how confident the supplier is in the buyer and how confident the buyer is in the supplier.

How payment terms are usually formulated

In the commercial practice of Chinese exports, several basic schemes are common. The exact proportions depend on the industry, order volume, length of cooperation, and the specific factory, so any percentages below are a guide for understanding the logic, not a standard.

• Partial deposit and balance before shipment. The most common scheme when working with a new buyer: part of the sum is paid upon signing the contract, and the remainder before the goods leave the factory. For the buyer, this means that a significant portion of the money goes out before they have seen the finished product.
• Deposit and balance against a copy of the bill of lading. A gentler option for the buyer: the remainder is transferred after shipment, when there is a document confirming that the goods have actually been dispatched. Suppliers agree to this reluctantly and usually only when there is trust or when working through an intermediary.
• Letter of credit (L/C). A banking instrument in which payment is made against a set of documents. For large orders and for parties that are not ready to trust each other directly, this is a way to reduce risk, but it adds banking costs and requires careful paperwork: discrepancies in documents are a common cause of delays.
• Full prepayment. Occurs with small amounts, sample orders, or when working with a new supplier with no history of relations. For the buyer, this is the maximum risk, and it is reasonable to consider such a scheme only where the amount of potential loss is bearable.

Bank transfer (T/T) is a technical method of sending money that can serve any of the schemes above. It is important not to confuse the method of payment with its structure: the phrase "we work by T/T" does not answer the question of when exactly each part is transferred.

定金 (dìngjīn) and 订金 (dìngjīn): two similar words with different consequences

This is where linguistic precision is directly tied to money. In Chinese business language there are two words that are pronounced identically — dìngjīn — but are written with different characters:

• 定金 (dìngjīn) — a deposit in the legal sense. This is a security sum: if the buyer backs out of the deal, they may lose it; if the seller backs out, they may be obliged to return the sum in an increased amount.
• 订金 (dìngjīn) — an advance, a preliminary payment. Such a payment is usually regarded as part of the future payment and, if the deal is cancelled, is subject to return, without a penalty function.

The difference is not in a shade of politeness but in legal consequences. That is precisely why in the contract and in correspondence it is important to look not at the sound but at the characters. If the supplier writes 定金 in a letter and the buyer reads it as "advance," the parties may diverge in their understanding of what will happen if the deal falls through.

A caveat worth keeping in mind: the specific legal consequences of a given term depend on the applicable law, the wording of the contract, and the jurisdiction of the dispute. This article is not legal advice. If the deal amount is significant, it is reasonable to show the contract to a lawyer familiar with Chinese contract law rather than resolving the issue with a dictionary.

What to clarify before signing

Most payment problems arise not from malicious intent but from details that were not spelled out. Below are the things worth putting in writing before the money goes out.

Structure, not just percentages

"30/70" is not yet a complete description. You need to understand which event each part is tied to: signing the contract, confirming the sample, completing production, shipment, receiving a copy of the bill of lading. The same proportion at different trigger points means a completely different level of risk for the buyer.

Currency and the party bearing the costs

Settlements may be in US dollars, in yuan, or in another currency. Both currency risks and banking costs depend on this. It is worth separately spelling out who pays the fees: the sender's bank, the recipient's bank, correspondent banks. Wording like "all bank charges are for the buyer's account" can noticeably increase the actual cost of the order, especially for small amounts.

Bank details and verifying the recipient

Payment must go to the account of the company specified in the contract, not to the manager's personal card. A request to transfer money to a private individual is a serious signal, regardless of the explanations. It is worth checking the company name, account number, and bank against the contract and, where possible, against official registration data.

Linking payment to acceptance

If the balance is tied to shipment, it is useful to define in advance what counts as confirmation of readiness: a photo report, an inspection report, a video from the line. Without this, a dispute about the quality of goods after payment almost always turns into a dispute about facts that can no longer be verified.

Timelines

You need to understand not only when the buyer pays but also when the supplier is obliged to start production and when to ship. Payment without a corresponding deadline loses its meaning as a tool.

How to discuss changing the terms

Asking to reduce the deposit is a normal part of negotiations. The question is how it is formulated.

Arguments that reduce the supplier's risk work, rather than simply demanding a concession. For example: offering to increase the volume, confirming the regularity of orders, readiness to work through a letter of credit, paying part of the sum immediately after sample confirmation. A supplier concedes on the deposit when they see that the risk is compensated by something else.

Arguments built on distrust work poorly: "we don't trust you," "all Chinese suppliers cheat." In Chinese business communication, a direct expression of distrust is perceived not as business caution but as an attack on the counterpart's reputation. This does not mean the issue cannot be raised — it can, but through mechanics: "we need to coordinate the payment scheme with our finance department," "we work by this scheme with other suppliers," "let's tie the balance to an inspection report."

Another practical point: in Chinese correspondence, refusal is often expressed indirectly. An answer like "we'll check" or "this is difficult" does not mean agreement. If the supplier has not explicitly confirmed the new scheme, it is reasonable to assume it is not agreed and to ask a clarifying question in a different formulation.

The role of 关系 and trust: why the first deal is almost always more expensive

关系 (guānxi) is not just "useful contacts." It is a system of mutual obligations that builds up from a history of interaction. In the context of payment, this means a simple thing: the supplier evaluates not only your order but also how you have behaved before.

For a new buyer with no history of relations, the deposit will almost always be higher. This is not greed and not distrust of you personally — it is the factory's way of protecting itself from a risk it cannot assess. As you work together, in the absence of conflicts and delays, the terms usually soften: the deposit decreases, and the possibility appears of tying the balance to shipment.

Hence the practical conclusion: the first deal is not the place to fight for ideal terms. It is more reasonable to conduct it on a small volume, carefully fulfill your obligations, and use that experience as a basis for revising the terms in the second and third deals. An attempt to immediately bargain for the most favorable scheme with an unfamiliar supplier often results in the factory simply building the risk into the price.

Typical mistakes of Russian-speaking buyers

• Discussing payment separately from acceptance. Payment terms without quality criteria and inspection timelines protect no one.
• Ignoring the characters. Relying on the spoken word "deposit" and not checking whether the contract says 定金 or 订金.
• Transferring money to a private individual. Even if the manager explains it as "speed" or "convenience."
• Not putting agreements in writing. Verbal concessions at a meeting or on a call have no force if they are not confirmed in correspondence.
• Pressing on distrust. Direct statements about the risk of being cheated worsen your negotiating position rather than improving it.
• Assuming the scheme is universal. Terms vary by industry: in electronics, textiles, equipment, and raw materials, the norms can differ noticeably.

Practical checklist

• The payment structure is described by events, not only in percentages.
• The settlement currency and the party paying bank fees are specified.
• The recipient's bank details match the company in the contract.
• It has been checked which character is used: 定金 or 订金.
• The balance is tied to a verifiable event: shipment, a copy of the bill of lading, an inspection report.
• Production and shipment timelines are put in writing.
• All agreements are confirmed in correspondence, not only in conversation.
• For large amounts, the contract has been reviewed by a lawyer.

FAQ

Can the deposit be reduced on the first order?

Sometimes yes, but usually not by pressure, rather by reducing the supplier's risk: a smaller volume, payment through a letter of credit, readiness to work from a sample. The smaller the amount of the first deal, the easier it is to agree on a gentler scheme.

What should I do if the supplier asks to transfer money to a personal card?

This is a reason to ask questions, not to agree automatically. Payment to the account of the company specified in the contract is standard practice. If the supplier insists on a personal account, it is worth finding out the reason and, if in doubt, considering another supplier.

Is a letter of credit always more advantageous than a bank transfer?

No. A letter of credit reduces risk for both parties but adds costs and requires precise paperwork. For small orders, its cost may be disproportionate, and discrepancies in documents sometimes delay payment more than a direct transfer.

Is it necessary to change payment terms as you work with a supplier?

Not necessarily, but it is often possible. Suppliers usually revise the scheme when there is a positive history: stable orders, no disputes or delays. The initiative on this question comes from the buyer.

How much do payment terms vary by industry?

Noticeably. In industries with a long production cycle and expensive raw materials, the deposit is usually higher. In segments with high competition and standardized products, suppliers are more flexible. Specific proportions are worth checking with several suppliers in the same category to understand the market benchmark.