Neat Team October 29, 2021 7:58 am

How to Send Money to China: 10 Ways to Pay Suppliers in Mainland China

Sending money to China isn’t the most straightforward task.

To start, exchange rates, transfer fees, and the abundance of payment methods available can make it challenging to figure out the best way to send money to China. 

Plus, some lesser-known payment methods can be a little confusing — I mean, what exactly are letters of credit and escrow?

If that’s not enough, if you choose the wrong payment method for your needs, you could end up wasting money on unnecessary fees.

So, what’s the best way to send money to China?

In this quick-fire guide, you’ll learn about 10 popular ways to send money to China and each methods’ pros and cons. 

But before we dive in, let’s set the scene by answering a common question:

China’s renminbi vs yuan: What’s the difference?

If you’ve done some research on sending money to China, you’ve probably noticed that China’s currency has two names: ‘renminbi’ and ‘yuan.’

So, what’s the difference?

In short, China’s currency is officially called the ‘renminbi’ — which translates to “the people’s currency.” However, ‘yuan’ is the term used to describe the unit of measurement.

To understand this better, think of ‘renminbi’ and ‘yuan’ like the British ‘pound sterling’ and ‘pound.’ The UK currency’s name is ‘pound sterling,’ but people don’t say they’ll give someone ‘100 pounds sterling’ — they would simply say ‘100 pounds.’

> Learn more about renminbi vs yuan here.

Now that’s cleared up, how can you send money to China? Here are 10 options to consider.

1. Neat

Neat provides business accounts and corporate cards built for growth. 

You can use the service to incorporate your business in Hong Kong, manage your business’s finances, and send and receive money internationally. Neat’s multi-currency account allows you to hold and manage US dollars, Hong Kong dollars, Euros, and British pounds.

Neat also allows you to make payments to more than 35 countries at competitive rates — including China.

Neat allows users to make USD and CNY payments to China. 

To get started, sign up for a Neat account. Then, to send money to China, all you’ll need is the recipient’s:

  • Bank name
  • Account number
  • SWIFT code
  • Account holder name (in English)

You’ll also need a supporting document to verify the transfer’s purpose for security reasons — usually an invoice — which should:

  • Specify the goods or services provided
  • Be signed and certified by the recipient
  • Be a PDF, JPG, or PNG file

Additionally, when you receive a CNY payment into your Neat account, you’re able to convert the money into other currencies and avoid hidden transfer and exchange fees.

You can also use Neat to accept payments in many currencies, including Chinese yuan. However, the money will be automatically converted into HKD, GBP, or EUR — depending on which wallet receives the money.

2. Escrow

The term ‘escrow’ refers to a third party that facilitates transactions between a buyer and seller. 

Here’s how it works: Before the supplier begins work, the buyer will send the payment to the escrow service. Once the buyer has received the goods and is satisfied, the escrow service will release the money to the supplier. Should there be a dispute, the escrow service will mediate and help both parties come to an agreeable solution.

Consequently, escrow services offer a highly secure way of sending money to China. That said, when disputes arise, it can be challenging to get the resolution you need.

This type of payment also isn’t widely available for international transactions. But if you’re sourcing products or services using Alibaba, you may be able to pay using Alipay Escrow.

Escrow isn’t cheap, either.

Typically, fees are around 5% of the transaction. And although these fees are often charged to the supplier, they’ll almost certainly pass them onto buyers through price increases.

Bottom line, escrow is convenient for smaller transactions with new suppliers that you don’t have a solid relationship with yet. However, they’re not ideal for larger transactions due to the additional costs involved and the fact that your money could be tied up in an escrow account for some time.

3. Third-party sourcing agencies

Acceptance of escrow for international payments is more widely accepted in China if you make purchases via a local Chinese sourcing agency. 

These sourcing agencies reduce the risk for both parties, make communication easier, and facilitate the exchange of funds. So, should the goods arrive damaged or defective, the agency can reject the goods and return the escrow payment to the buyer.

Unsurprisingly, these services significantly increase the cost of sending money to China, often charging more than the typical 5% escrow fee.

So again, third-party sourcing agencies may be a good choice for smaller transactions with new suppliers. But the fees involved make this way of sending money to China disadvantageous for larger transactions.

4. International wire transfers

International wire transfers — also known as Telegraphic Transfers or T/T payments — have been around for a long time and are widely accepted by suppliers in China.

These payments rely on the SWIFT network — a network of banks that work together to facilitate transactions. As a result, it usually takes a few days to a few weeks for payments to arrive. 

What’s more, there are currency conversion fees that are typically calculated using a poor exchange rate. Plus, each bank charges a small fee for facilitating the transaction — and these fees add up.

This way of sending money to China has risks for both buyers and suppliers. Essentially, once you send your payment, there’s little-to-no recourse if things don’t go according to plan. This is why suppliers will usually insist on an upfront deposit to lower their risk — which, of course, increases your risk.

For these reasons, it’s best to only use wire transfers with suppliers that you trust.

All in all, international wire transfers offer a popular and relatively straightforward way to send money to China. However, these transfers can be very costly for the buyer.

5. Letters of Credit (LCs)

Letters of credit (or LCs) are letters issued by banks that guarantee suppliers will receive payment when the terms and conditions of the agreement are met.

International traders and larger suppliers are generally happy to accept LCs — in fact, many will insist on one. Why? In short, LCs reduce the risk for suppliers by ensuring the buyer will pay. 

But are LCs advantageous for buyers? In short, yes. LCs can help to ensure that suppliers fulfil their promises and deliver what was agreed.

For these reasons, LCs are particularly popular for transactions that are more than $50,000. However,  many small and medium-sized suppliers are reluctant to accept LCs due to the high fees, complex paperwork, and language barriers involved.

If you decide to use LCs to send money to China, be sure to seek professional advice and guidance before diving in.

6. Western Union

Western Union has been around for a long time and is still a convenient way to send money to China.

To send money to China with Western Union, head to a location grocery store or post office that facilitates Western Union payments. When you pay the cashier, you’ll be asked to detail who the payment is for, and you’ll be given a control number. You would then give the number to your supplier, who will collect the payment from a Western Union outpost in China.

This is one of the best ways to send money to China if you’re short on time, as transfers can be incredibly fast. Suppliers also tend to like this form of payment because it’s easy, fast, and cheap — at least, for them.

However, Western Union is quite expensive for buyers. Although the fees may seem low, the service makes money via costly exchange rate markups. It’s also a relatively risky way to send money — there’s very little you can do to get your money back if a supplier does not deliver what was promised.

To summarize, Western Union can be a good option for small, personal payments. But it’s pretty risky and costly for business transactions.

7. PayPal

To send money to China via PayPal, both you and your supplier will need to have a PayPal account. However, very few Chinese suppliers use PayPal, but the service is becoming more popular for small transactions. 

Still, suppliers are wary of accepting payments via PayPal, as buyers can issue fund recalls after receiving the goods or services.

And although PayPal is focused on buyer protection, the company’s international protection policies are complex. As a result, disputes can be challenging to handle if something goes wrong.

PayPal also charges a percentage of the transaction amount as well as exchange fees. These costs can become substantial as the transaction amount increases.

The gist? PayPal can be a convenient way to send small amounts of money to China. However, the fees involved make it an unattractive option for small and medium-sized businesses.

8. Wise

Wise (formerly TransferWise) offers a similar service to Neat, with a multi-currency account and convenient online international transfers.

The service allows you to send money to China in US dollars or Chinese Yuan. And if you’re sending money to Hong Kong, you can send US dollars or Hong Kong dollars. Wise also allows you to send money via credit or debit card or bank transfer.

Plus, suppliers don’t need to use the service — the funds will be deposited directly into their bank account.

9. International credit or debit cards

It’s possible to send money to China using your credit or debit card. However, like PayPal, the risks are incredibly high for the supplier as buyers can recall funds after receiving the goods or services. 

Credit and debit card fees are also typically very high — especially when exchange rate markups are considered.

Generally speaking, international credit and debit card transactions are an unpopular and expensive way of sending money to China. But if you’re in a pinch, you can always use your credit or debit card.

10. Cash

Unsurprisingly, suppliers worldwide are very happy to accept cash — and Chinese suppliers are no different. In fact, many China suppliers will offer a discount to incentivize buyers to pay in cash.

However, for most international transactions, cash isn’t an option — and even if it were, it’s perhaps the riskiest payment method of all. Like Western Union, there’s very little protection should things go wrong. 

And when paying in cash, you’ll still face exchange rate fees and markups. 

So, although cash is a popular payment method in China, it’s very risky and cumbersome for international buyers.

Summary: How to Pay Suppliers in China 

If you’re looking for a way to send money to China, there are plenty of options available — each with its pros and cons.

When weighing your options, consider the costs and risks involved. Some options may seem cheap and convenient but present enormous risks. Others are costly and time-consuming but provide more security.

In summary, here are 10 ways to pay suppliers in China:

  1. Neat
  2. International wire transfers
  3. Escrow
  4. Third-party sourcing agencies
  5. Letters of Credit (LCs)
  6. Western Union
  7. PayPal
  8. Wise
  9. International credit or debit cards
  10. Cash

If you’re engaged in international commerce, sign up for a Neat Business account today to get a multi-currency account and Visa corporate cards! Having doubt? Book a time to talk to one of our product specialists today. 

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