What is the payment term?

付款条件 (payment terms) is the conversation that follows price negotiation and is equally important to the deal structure. The standard Chinese factory model is 定金+尾款 (deposit + balance), typically expressed as a ratio: 30/70 means 30% deposit to start production, 70% balance before shipping. 50/50 splits the risk evenly. 100% upfront means the factory doesn’t trust you yet or the order is too small to be worth credit risk. Understanding that payment terms are a trust meter, not a fixed policy, helps you negotiate more effectively — a factory that asks for 100% upfront isn’t necessarily predatory; they may have been burned by foreign buyers who disappeared after production.

The deposit (定金, dìng jīn) serves a specific legal function in Chinese contract law: it binds both parties. If the buyer cancels, the deposit is forfeited. If the seller can’t deliver, they must return double the deposit (双倍返还). This is why factories insist on deposits — it’s not just cash flow, it’s commitment. The balance (尾款, wěi kuǎn) is typically paid before shipping (发货前付清), which protects the factory: they don’t release goods until paid. Buyers often push for “balance against copy of documents” or “balance after receipt,” which shifts the risk. New relationships default to the factory’s terms; established relationships can negotiate toward the middle.

For larger orders, Letter of Credit (信用证, xìn yòng zhèng, L/C) is the safer instrument — the bank guarantees payment upon presentation of shipping documents. Chinese factories are increasingly comfortable with L/C for orders over roughly $50,000, though smaller factories may not have experience with them. If you’re asking about L/C, the phrase 你们能不能做信用证 (can you do L/C?) is the opener. The factory’s response will tell you about their size and export experience: a yes means they’ve done this before. A confused response means you’re dealing with a smaller operation or a trading company without direct export experience.