Your Chinese Supplier Will Show You Anything. Ask It to Agree to Something Instead.

The business license arrived within ten minutes of the request.

Then the workshop video, shot on a phone, walking past machines that were plainly running.

Then a video call, at an hour that was inconvenient in China, with the owner leaning into frame to say hello.

Then a local contact drove out to the office, looked around for half an hour, and reported back that the company was real.

The buyer still hesitated before wiring the deposit, and could not have said why.

A Chinese export salesperson published a piece this spring listing five behaviors of that kind — the slow payment, the agent's visit, the repeated video calls, the pile of document requests, the endless revisions to the order — as the signs that a foreign customer does not trust you. She was reading them correctly as anxiety and, I think, misreading what the anxiety was about. That buyer was not trying to find out whether the seller was sincere. He was trying to find out what would happen to his money if it turned out not to matter whether the seller was sincere. Nothing he had been shown answered that.

The principal question. Before a foreign buyer prepays a Chinese supplier it has not dealt with before, which of the assurances customarily exchanged actually change the buyer's legal position, and which change nothing at all?

The short answer. Almost everything a supplier volunteers goes to identity: it tells you the business exists and is what it says it is. None of it decides what happens if that business fails. That is decided by terms you have to negotiate rather than request — which legal entity is bound and paid, how much of the price is still in your hands when delivery falls due, and whether the words in the invoice carry under PRC law the effect they appear to carry in English. A supplier will show you almost anything, because showing costs it nothing. The assurance worth having is the one that requires it to accept a consequence: deferred payment, a security arrangement, an additional obligor, or a forum in which enforcement is realistic.

What Verification Establishes, and What Only Negotiated Terms Can Change

A first cross-border purchase raises three questions, and buyers routinely collapse them into one.

Who is the counterparty — not who negotiates with you, but which legal person will be the defendant.

What leverage survives payment — what you still hold on the day delivery is due.

What is a claim worth — what it costs, and how long it takes, to turn a breach into money.

Only the first can be answered by looking, and looking is what the entire pre-payment ritual consists of. An agent looks at the office. A camera looks at the salesperson. A document request looks at the file.

The distinction I would want a first-time buyer to carry away is between the proof that is free to give and the proof that is not.

Photographs are free. A video call is free. A tour of the premises for a visiting agent costs an afternoon, and a supplier that has no intention of performing can produce all of it just as easily as an honest one. None of it distinguishes between them.

Terms are not free. A supplier that agrees to hold thirty percent of the price until inspection has given up thirty percent of its cash flow and part of its bargaining position. A supplier that accepts a letter of credit has accepted a document examination it may fail. A supplier that agrees to be sued at its own domicile has given up the delay an ill-drafted arbitration clause would have bought it.

So the informative moment in a first transaction is not the workshop video. It is the sentence that follows a proposed payment structure. Agreement is informative because it requires the supplier to surrender something; every other proof is offered freely precisely because it costs nothing.

What the buyer does	What it establishes	What it does not establish
Checks the license and registry file	The entity exists and who owns it	That it will perform, or can refund
Sends an agent to the premises	Operational reality on that day	Solvency, or capacity next quarter
Takes a video call	Who is communicating, and the relationship	That the person speaking owns or can bind the contracting entity
Holds part of the price to inspection	Commercial leverage that survives payment	Delivery itself
Obtains a guarantee	A second obligor	Immediate recovery, unless the form is stated

I do not read a refusal as bad faith. Small Chinese exporters run on thin working capital and are often genuinely unable to fund made-to-order production without an advance. The point is narrower: what a counterparty will agree to is information available for the asking, and most buyers never collect it, because they spend the entire pre-payment period asking for documents instead.

The rest of this article is what follows from that — who ends up bound, what the first payment actually secures, and who else can be reached.

Who You Will Be Suing Was Decided Before You Met Anyone

Under PRC law, the person across the table binds the company more readily than foreign buyers expect.

An employee who acts within the scope of their duties, in the name of the company, will generally bind the company: PRC Civil Code (2020, effective January 1, 2021), Article 170, under which internal limits on that authority cannot be asserted against a counterparty in good faith. Where authority was absent or exceeded but the counterparty had reason to believe it existed, the act may still bind: Article 172, and, for the legal representative, Article 504.

So the sales manager who quoted the price, chopped the proforma invoice and promised the delivery date will usually bind her employer. Buyers who worry about whether the right person signed are often worrying about a problem PRC law has already resolved in their favor.

What PRC law has not resolved is which employer. The company that quotes may not be the company named on the contract, which may not be the company whose account receives the wire. Each substitution is ordinary in Chinese export practice, and each one moves the defendant. A buyer who pays a trading company for goods made by a factory has a claim against the trading company; the factory owes it nothing. A buyer asked at the last moment to pay a different entity — an offshore affiliate, a forwarder, a friend of the owner — is being asked to open a gap between the party that owes performance and the party holding the money. In my experience that request is granted more casually than any other term in the transaction.

It is also why the copy of the salesperson's identity document was worth so little to the buyer who asked for it. Individuals are not liable for their employer's contracts. Collecting personal identity papers verifies a person you will never sue.

The verification that carries weight is duller. The unified social credit code on the license, checked against the national enterprise credit information system. The shareholders and their subscription dates: under the PRC Company Law (2023 Revision, effective July 1, 2024), Article 47, subscribed capital must generally be paid up within five years of the company's establishment. Whether this is a single-shareholder company, where Article 23, paragraph 3 places on the shareholder the burden of proving that the company's property is separate from its own. Whether the company already appears as a judgment debtor.

Those facts begin to answer the question the photographs cannot: if this fails, is there anything to collect. Where a company cannot pay its debts as they fall due, Article 54 permits the company, or a creditor whose claim has matured, to require shareholders to pay in subscribed capital ahead of the agreed schedule. In practice, for lightly capitalized trading companies, unpaid subscriptions may be among the few recoverable assets. Knowing the number before you pay is worth more than discovering it afterward.

The Word "Deposit" May Buy You Nothing

This is the drafting point international readers most consistently underestimate.

English trade documents use "deposit" loosely, to mean the first installment. PRC law has an institution that looks like it and behaves differently. Under the Civil Code, Articles 586 to 588, a deposit is a form of security: if the paying party defaults it is forfeited, and if the receiving party defaults so that the purpose of the contract cannot be achieved, it must be returned twofold. The amount may not exceed twenty percent of the value of the principal contract, and any excess does not have that character.

Two consequences follow, running in opposite directions.

The remedy is available on a modest slice of the price only. A buyer who wires the full amount in advance has no deposit at all in the legal sense. It has an advance payment, recoverable by way of restitution, with no multiplier and no security attached. Full prepayment does not merely enlarge the exposure in proportion; it converts a partly secured position into an unsecured one.

And the label alone does not do the work. Under the Supreme People's Court Interpretation on the General Provisions of the Contract Part of the Civil Code (Fa Shi [2023] No. 13, effective December 5, 2023), Article 67, where a party pays money described as retention money, security money, margin, booking money, a pledge or earnest money, but the parties did not agree that it carries the character of a deposit, a court will not apply the deposit rules; where they agreed it is a deposit but did not specify the type, it is treated as a default deposit.

Set that against what a proforma invoice usually says. "30% deposit, balance before shipment" agrees on timing. It does not agree on character. The problem is not the English word chosen. It is whether the parties intended, and recorded, the specific legal effect that PRC law attaches to that institution. One added sentence — that the sum is a deposit securing performance, returnable twofold if the seller fails to deliver — changes the remedy, and costs the buyer nothing to propose. Whether the seller accepts is, once again, the informative part.

This analysis assumes that PRC law governs the payment arrangement; a different governing law may produce a different result. Where the parties have places of business in different contracting states, the United Nations Convention on Contracts for the International Sale of Goods governs formation and the buyer's substantive remedies by default. Security arrangements of this kind are a matter for the applicable domestic law rather than the Convention, which is why the governing law clause and the payment clause have to be read together instead of filled in from separate templates.

A Guarantee From the Owner, in Two Sentences

Buyers who become uneasy late often ask the owner for a personal guarantee. It is worth having and easy to get wrong.

The Civil Code recognizes two forms. Where the guarantee contract does not stipulate which, or the stipulation is unclear, Article 686 treats it as a general guarantee, and Article 687 allows a general guarantor to refuse payment until the principal debtor has been pursued through proceedings and enforcement has proved fruitless. Where the guarantee period is not agreed or is unclear, Article 692 runs it for six months from expiry of the principal debt's performance period. Common-law readers usually assume the opposite on both points.

A two-sentence guarantee sent by email from a cooperative owner is therefore likely to be the weakest available version, expiring six months after the delivery date the buyer is still hoping will be met. The presumption is not applied mechanically — it operates where the guarantor's intention genuinely cannot be determined from the wording and the surrounding circumstances — but litigating what a short email meant is a poor substitute for a clause that says "joint and several" and names a period.

Where the Ritual Actually Works

None of this makes the agent's visit pointless.

Sending someone to look at the premises screens for the crudest loss, where nothing exists at all. It is quick, it is cheap, and in my experience it does deter the counterparty that never intended to ship. The salesperson who wrote that list was right that the money often moves the moment the car pulls away.

The limitation is that it screens for one failure mode. Most losses on prepaid orders do not involve a supplier that never existed. They involve a supplier that existed, meant to perform, took the money, and then met its own cash problem, its own supplier's default, an export restriction, a raw material spike, or simply a better-paying order. Nothing an agent could have seen that afternoon predicts any of it. The office was real. The samples were real. The company was, that day, doing exactly what it said.

This is where the written rule and the practical outcome part ways. On the law, a buyer whose seller fails to deliver has an uncomplicated claim. On the ground, recovery was fixed earlier — by whether the buyer still holds part of the price, whether a second obligor can be reached, and whether the agreed forum costs less than the sum in dispute. Foreign buyers frequently overestimate the protective value of what they can see, and underestimate the protective value of a paragraph they could have proposed by email in the week before payment.

There is a quieter cost as well. A buyer who spends four weeks asking for documents arrives at the payment discussion having already made clear that it wants the deal. Leverage peaks in the hour before the first wire and falls to nothing immediately after. Spending that hour on reassurance rather than on terms is the most common unforced error I see in small cross-border purchases.

Practitioner's Note: Sincerity and Solvency Are Different Facts

The five behaviors are accurate as observation. Buyers who behave that way are uneasy, and the underlying question — how do I know this is not a fraud — is a reasonable one to ask.

It is aimed at the rarer risk. Fraud is the failure mode easiest to screen for. Ordinary commercial failure is the common one, and verification does not touch it, because at the time of verification there is nothing wrong to find. The mistake is not asking for reassurance. It is treating reassurance as security.

What can be done in that last week is narrow and unglamorous. Confirm that the entity being paid is the entity that owes delivery. Keep a meaningful part of the price until something has been inspected. Say what the first payment is, in terms the applicable law recognizes. Name the guarantee's form and its period. Choose a forum on the arithmetic of collecting.

Then take the video call. It is pleasant, and the relationship is worth having.

A supplier's willingness to be seen tells you it is real. Only its willingness to be bound tells you what its promise is worth.

Questions Buyers Ask

We checked the license and sent someone to the factory. Is that enough before prepaying? It is the right first step and it answers only the identity question: that the entity exists, who owns it, and that there was a working business at the premises on the day of the visit. It says nothing about whether the company can refund you next quarter. Use the registry file for the parts that bear on recovery — shareholders, subscribed capital and its due dates, enforcement records — and treat the visit as a screen, not a safeguard.

Our proforma invoice says "30% deposit". Do we have a deposit under PRC law? Probably not. Where the parties have not agreed that the sum carries the character of a deposit securing performance, a court applying PRC law will treat it as an advance payment and will not apply the double-return rule. If that remedy matters, the character has to be stated in the contract, and the amount kept within twenty percent of the contract value.

The owner sent a short email guaranteeing the order personally. Is that enough? Better than nothing, and weaker than it looks. A guarantee that does not state its form is presumed to be a general guarantee, which lets the guarantor insist that the company be sued and enforcement exhausted first, and one that does not state its period lasts six months from the date the principal debt fell due.

Legal Authorities

• PRC Civil Code (2020, effective January 1, 2021), Articles 170, 172, 504 (authority of employees and legal representatives; apparent authority), 586 to 588 (deposit), 686, 687, 692 (form of guarantee, benefit of discussion, guarantee period)
• Supreme People's Court Interpretation on the General Provisions of the Contract Part of the Civil Code (Fa Shi [2023] No. 13, effective December 5, 2023), Article 67
• PRC Company Law (2023 Revision, effective July 1, 2024), Articles 23, 47, 54
• United Nations Convention on Contracts for the International Sale of Goods (1980)

Related Reading

• I Took a Korean Buyer to the Address of His Precious Metals Seller. It Was Now a Pharmacy. — what a full prepayment costs a buyer once the seller has moved out and the claim has to be collected.
• Someone Used Your Company's Name to Commit Fraud. You Are Not the Victim. — on what a genuine company record does and does not tell you about the business behind it.

More on this area of practice: Cross-border Business.

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This article is general commentary on PRC law and not legal advice on any particular transaction.

Last reviewed: August 10, 2026.