The 8 most commonly used payment methods for Chinese suppliers

By justchinait
 / 
December 4, 2020
 / 

For international trade businessmen, how to collect money overseas safely and quickly is very important. At present, the most commonly used foreign trade collection method is to open an offshore account in Hong Kong. However, as policies have continued to tighten in recent years, some Hong Kong banks have begun to clean up invalid and abnormal accounts. At the same time, the threshold for opening accounts has increased significantly, making it difficult for smaller customers to open accounts.

However, in addition to Hong Kong offshore accounts, there are also many other ways to collect money. Different ways of collecting money have their own characteristics. You may wish to know about them.

There are usually more introductions about T/T, L/C, D/P, D/A, so that I won’t introduce them in detail here.

1.Western Union

The world’s leading express remittance company has a history of 150 years so far. It has the world’s largest and most advanced electronic remittance financial network, with agent outlets in nearly 200 countries and regions worldwide. It is a traditional transaction mode, and most countries around the world Are in use.

Bank of China, China Everbright Bank, China Postal Savings Bank, China Construction Bank, Zhejiang Chouzhou Commercial Bank, Jilin Bank, Harbin Bank, Fujian Strait Bank, Yantai Bank, Longjiang Bank, Wenzhou Bank, Huishang Bank, Shanghai Pudong Development Bank, etc. This bank is a Western Union China partner.

For small private remittances, Western Union is recommended first. You only need to tell the customer your name and nationality to make the payment. Remember the order of surname and first name:

Chinese GIVEN NAME is the first name and also the FIRST NAME.

The FAMILY NAME in China is the last. Tell the customer not to write it backward. After the customer makes the payment, there will be a payment voucher, which is often referred to as the water bill. There is an important information MTCN number, called the monitoring number. With this number, You can collect foreign exchange at the above-mentioned bank counter or on the Internet. The payer pays the Western Union fee. Therefore, the cost of foreign exchange collection is zero.

Advantages:

fast collection, arrival in the account within a few minutes, first payment and then delivery, to ensure that business interests are not lost

Disadvantages:

Pay first and then ship, foreigners are prone to distrust.

The customer base is small, which limits the business volume.

The amount is relatively large; the handling fee is high.

Cost: Account opening is 10,000-20000RMB. Some banks require depositing a certain amount or purchasing wealth management products before opening an account. The transfer is about US$15 per transaction.

2.MoneyGram MoneyGram

Western Union and MoneyGram are the two fastest remittance methods globally, both of which can get cash within a few minutes, and the procedures are simple. However, because the funds arrive instantly and the security is not enough, the buyer will suffer heavy losses if the seller cheats. Foreigners do not recognize this method.

So when your client tells you to send you a MONEY GRAM, you only need to ask your client to:

(1) Reference number (remittance password) eight digits

(2) Sender s first name (sender s first name)

(3) sender s surname (sender s surname) and then go to the local branch of the relevant local cooperative bank, which has a special MONEY GRAM counter. They will give you a collection form, fill in the customer and your relevant information, and bring You can get the money with your ID card.

Advantages: fast arrival time

Disadvantages:

The services scope is limited by the number of cooperation between professional remittance companies and banks, and the fees are relatively high. In addition, whether it is a bank wire transfer or a professional remittance company, the remitter still has to go to the handling office to handle it, which is not convenient for the operator. For remittances in foreign currencies other than USD, this method of remittance is not applicable.

3.International credit card

VISA/MASTER, credit cards are the two most popular international credit cards in the world. Online payment is safe, fast, and convenient. And international credit cards also support AE card, Diners Club, JCB card.

advantage:

Suitable for small and medium payment collection, flexible, convenient, fast and the most comprehensive, benefiting customers from all countries

Facilitate online payment for global users, increase transaction volume, and stable cooperation

Increase your website’s credibility and give you more business opportunities

No freezing of funds

Support virtual and independent websites

Disadvantages:

Now that several domestic companies open this channel, they all need to account opening fees and annual service fees.

The threshold for making foreign trade is relatively high, suitable for people with financial strength.

4.Hong Kong offshore account

First, let us briefly introduce Hong Kong offshore accounts. As a world-renowned financial and trade center, Hong Kong has high-profile banks worldwide, such as HSBC, DBS Bank, Hang Seng Bank, etc, which have great advantages in foreign exchange-related businesses. Go to Hong Kong Opening an offshore account was the default collection method for most foreign trade companies in the past.

Advantages:

Free from foreign exchange control, flexible deposit and withdrawal, and free capital allocation.

Disadvantages:

The tightening of policies has led to frequent closures of offshore accounts in Hong Kong, and many regular offshore accounts have also been frozen;

In the future, the threshold for opening a Hong Kong account will be higher and higher.

Cost: Account opening is 10,000-20000RMB. Some banks require depositing a certain amount or purchasing wealth management products before opening an account. The transfer is about US$15 per transaction.

5.Yiwu self-employed account

Yiwu self-employed accounts are a favorable policy introduced by the state in 2014 to encourage the development of foreign trade companies and individual SOHOs. The account is characterized by foreign exchange settlement and receipts that are not controlled, and there is no need to file tax returns.

Users can apply for Yiwu self-employed business only if they have an individual business license. After the application is successful, they can be used for USD foreign exchange collection and settlement, PayPal cash withdrawal, etc. The received USD cannot be transferred out, and the RMB settlement can be freely transferred out.

advantage:

Tax exemption (national policy of exemption and refund), large amount unlimited, no need to provide logistics certificate and PI when foreign exchange settlement.

Disadvantages:

You need to bring your ID card and sign at the branch to open an account.

The entry time is not very stable, and it is troublesome to fill in the transferring bank each time.

Users cannot transfer out after receiving foreign exchange.

Fees: 3RMB or 1.5 USD will be charged for settlement of USD 10,000; PayPal withdrawal of USD 42 per transaction

6.Agent for Import and Export Company

Some foreign trade companies also use import and export companies to collect payments on their behalf, ship goods in the name of the import and export company, and foreign buyers send the cost to the import and export company’s account and then transfer it to their account. However, considering safety, many foreign trade merchants will choose a company agent they know.

advantage:

Import and export companies have the right to operate import and export, and certain products require special qualifications for export. At this time, foreign traders can entrust qualified import and export companies to act as export agents.

Disadvantages:

In this way, the goods and funds will go through the agency company, and it is easy to happen that the fraud company takes the payment of the goods and runs away.

This payment method relies heavily on the agency company. If the agency company changes, it will easily affect the normal delivery and collection of foreign trade merchants.

7.PayPal collection

If you are an independent foreign trade station, you should be familiar with PayPal collection. As the world’s most well-known payment tool, PayPal has a wide coverage, can be used in 45 countries, has more than 100 million users, and has a high degree of international recognition and practicality.

advantage:

It is widely used worldwide and is suitable for small foreign trade SOHOs. PayPal’s international payment channel can meet the payment habits of customers in most regions.

Disadvantages:

Domestic withdrawal is inconvenient, there is a limit of USD 50,000 in foreign exchange settlement, and the handling fee is high;

PayPal has strict requirements for seller accounts, and seller accounts are easily frozen after complaints.

Fees: 2.9-3.9% + USD 0.3 for receipts; single withdrawal of USD 35.

8.Electronic offshore account

Electronic offshore accounts are a method of foreign trade collection jointly launched by banks and third-party payment institutions and are essentially cross-border collection products of banks. Banks are responsible for providing funding channels, and third-party payment institutions are accountable for user qualification and compliance review, speed up the review process and ensure account security.

Low fees and convenient operation characterize electronic offshore accounts, but they are strictly audited and require complete transaction vouchers. Generally, invoices, order information, logistics vouchers, etc. are required for entry and withdrawal.

advantage:

Compared with traditional offshore accounts, electronic offshore accounts are operated online throughout the entire process and do not need to go to the bank to sign the account in person. The operation is convenient, and the account opening fee, transfer, and withdrawal fees are lower.

Disadvantages:

It is necessary to provide trade vouchers for entry and withdrawal. If the foreign trader lacks invoice or logistics vouchers, and the bank fails the audit, there is a high probability that the funds cannot be entered or withdrawn.

Cost: The charging standards of different payment institutions are inconsistent. Some payment institutions charge 0.4% of the handling fee, and some payment institutions charge a certain amount of USD/EUR per transaction.

Some domestic trading companies will find that some overseas customers’ payments cannot be recorded because they come from sanctioned countries. How to reduce the risk of foreign trade collection? Here is a tip for you. A state on the sanctions list does not mean that all international remittances are suspended.

How to quickly determine that banks in sanctioned/sensitive countries can still conduct international remittances?

Solutions and suggestions:

Small amount transfer test: Before the customer makes a deposit or payment transaction, you can let the customer do a short transfer test to ensure no obstacle between the overseas remittance bank and the domestic foreign exchange bank, especially for new customers who have no previous transaction records.

Communicate with domestic banks in advance: After knowing the customer and the paying bank, communicate and confirm with the domestic bank in advance, and check the sanctions/risk information of the customer and the paying bank on their own.

Countries on the sanctions list do not trade: For countries/entities that are clearly included on the sanctions list, it is generally not recommended to continue trading.

Use a bank with historical transaction records: If your customer is in some sensitive country and the previous remittance is relatively smooth, try not to change the bank, check the normal remittance bank frequently, and agree with the customer in writing to use this bank for subsequent payments to avoid Unnecessary risks and disputes.

Be cautious when making (D/P) payment methods: The proof of payment (D/P) is risky to the exporter. For example, if the goods arrive at the destination port, if the importer has financial problems or the payment has not been successfully remitted before, it will Influencing the importer to redeem the bill at the bank is a complicated issue for the exporter to handle the goods. Therefore, under the (D/P) payment terms, it is necessary to strive for a wire transfer (T/T) advance payment of about 30%.

Purchase insurance: Take out export credit insurance to pass on risks. It can help you reduce economic losses.

Countries with high risks in international remittances

Countries like Iran, Sudan, North Korea, Syria, and Cuba are clearly on the sanctions list. Most domestic banks refuse to handle business in these countries. Still, the banking industry has not issued clear documents, and branches of the same bank in different regions will have other policies.

Some domestic banks will also take the initiative to carry out verification in order to avoid troubles. It is still unclear how they deal with international remittances from sensitive countries. CRS has been implemented in China to combat money laundering and tax evasion, and domestic banks are more cautious in handling foreign currency transactions.

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