The first payment to a new supplier is the one buyers find hardest to get back, and most of the checks that protect it take an afternoon. The questions below are the ones I go through before a client pays a supplier for the first time. Answer them for one supplier and one order. Your answers stay in your browser.
The company name on the PI or contract matches the Chinese name on the supplier’s business licence, character for character.
The English name on a PI carries little weight. The Chinese name on the licence is the company a court will hold to the deal.
You have looked the company up in the official register by its 18-digit unified social credit code, and it shows as existing (存续 or 在业).
The register is the National Enterprise Credit Information Publicity System, gsxt.gov.cn. It is free.
The account holder on the payment instructions is the same company that signs the PI or contract.
A personal account, or a different company, breaks the link between your payment and the party that owes you the goods.
If the bank details changed at any point, you confirmed the change through a channel you already had, not by replying to the email that announced it.
You have searched the supplier in the court enforcement records (zxgk.court.gov.cn), including the list of dishonest judgment debtors.
Lawsuits alone say little. An enforcement case closed without full payment (终本) tells you other creditors have already tried to collect and failed.
You know whether you are paying a factory or a trading company, and the contract names the factory that will make the goods.
The Chinese text of the PI or contract uses the word you intend for the up-front payment: 定金, or 预付款 / 订金.
Only 定金 carries the double-return rule, and only up to 20% of the contract value (Civil Code arts. 586 and 587). 订金 and 预付款 are simply prepayments to be refunded or credited.
The delivery date, the quality standard and the approved sample are in writing on the PI or contract, not only in chat messages.
If you have already sent drawings, files or samples, this company has signed an NNN or a confidentiality clause.
The PI or contract says what happens if the supplier fails to deliver: a refund deadline, and that the party in breach pays the other side’s legal fees.
In a Chinese court each side usually pays its own lawyer unless the contract shifts the cost.
You will keep the bank’s remittance record and get the supplier’s written confirmation that the payment arrived.
Which items matter most
Items 1, 3 and 5 decide whether you can get money back at all. If the company on the PI is not the company on the licence, if the money goes to someone else, or if the supplier already has creditors it cannot pay, the best contract does little for you. If any of those three is open, I would not pay until it is closed. The other items decide how hard and how expensive recovery will be.
The double-return rule in item 7 cuts both ways. If you call the payment 定金 and then cancel the order yourself, you lose it (art. 587). Where the contract has both 定金 and liquidated damages, you choose one of them when the other side breaches, not both (art. 588).
Sources
- PRC Civil Code (中华人民共和国民法典, effective 1 January 2021), articles 586, 587 and 588, text published in the Gazette of the Supreme People’s Court ↗
- Translations are mine and unofficial.
Want the supplier checked before you pay?
A supplier background check is USD 890 per supplier, or 590 per supplier with a contract package or for two or more suppliers: an eleven-section report signed by a PRC lawyer in 3 business days, covering the register, court and enforcement records and who you would actually be paying. We reply to every enquiry in writing.