How Does China Wire Supplier Work?

How to Make a Telegraphic or Wire Transfer to a Chinese Supplier?

Technology has made it easier than ever for small businesses and even individuals to move goods and services around the world. Today anyone with an idea can start a million dollar business in as little as a few months through a crowdfunding platform like Kickstarter or Indiegogo, while new Ecommerce merchants open every day through sites like Shopify that specialize in selling products from suppliers like Alibaba.

Whether they are sourced from Alibaba or another supplier of manufacturer, there’s a good chance the parts or goods themselves that are central to these businesses will come from China. China is easily the United States’ largest single source of goods, totaling over half a trillion dollars in imports in 2017 alone. All of those transactions require an equal number of payment transfers, which are typically done through a Telegraphic Transfer (TT), commonly known as a “Wire Transfer” or “Bank Transfer”.

Whether you are just getting started with our first wire transfer or you are already making a few transactions a year, it’s important to understand the process, execute the transfer correctly, and protect yourself from fraud — even seemingly innocuous mistakes can cost you thousands of dollars and weeks of delays.

Here are the steps you should know to successfully transfer money to your Chinese supplier:

Choose Your Bank

Any Telegraphic Transfer is initiated by your bank, routed through an intermediary bank, and finally processed by the supplier or beneficiary’s bank. If you already use a bank for your business needs, it’s worth checking into their international transfer services and fees. If this is your first transfer, you may even prefer to initiate the transfer in person with the help of a bank agent.

While you may be able to negotiate transfer rates with your bank, numerous online services are now available that offer competitive rates. Do your homework and find the bank or service that offers the best combination of low rates, trustworthy service, and ease-of-use.

Gather the Required Information

While every bank is different, most will require your supplier’s name, address, account number, the name of their bank, their bank’s address, their bank’s BIC/SWIFT code (a bank identification code or number) and you’ll have to choose the type of currency you want to send (USD or Chinese Yuan).

This sounds easy, but it can be quite complicated. Some Chinese manufacturers prefer to receive indirect international transfers through a separate offshore account (often through Hong Kong), while others use export agents who hold an export license and work on their behalf. Plus, China’s fast-moving economy often means that companies may change names and addresses more frequently.

Do your due diligence and get all payment instructions and changes in writing as part of the payment agreement. If you are sending to a Hong Kong intermediary (which is common and not itself a reason to be alarmed), make sure the account names match closely. If your supplier works with an export agent, ask to see the agent’s export license. Never, ever send money to private bank accounts. Telegraphic transfers don’t have the same protections as other financial services like credit cards do in the U.S., so do your homework and double check anything that looks suspicious.

Here a list of Hong Kong’s bank codes:
https://www.wfsfaa.gov.hk/sfo/pdf/common/Form/tsfs/bank_code.pdf

Fill Out the Transfer Form

At this point it may feel like filling out the transfer form itself should be a cinch, but this is the point where transfers are most commonly rejected. Chinese banks have a reputation as being a stickler for accuracy and will likely reject the transaction for even the smallest inconsistency or error.

The most common error that senders make is shortening the often-lengthy Chinese business names on the form itself, usually because the form field is too short. Instead of shortening the business name, think of the business name, address, and second address line as one long field — if you can’t fit the business name on the first field, continue it onto the address line, and continue the address onto the second address line or even the message field after that. When in doubt, ask your bank for assistance.

Once the form is filled out, double and triple check everything for accuracy. It’s easy to miss a stray “X” or “Y” when you are writing in a language you aren’t familiar with, while account number errors can lead to days and weeks of delays.

Initiate the Transfer and Pay the Fees

Once the form is filled out you will initiate the transfer and pay the fees. Note that you will pay all of the fees — your bank’s fees, any intermediary bank fees, and the supplier’s bank fees. Failure to pay all of these fees could mean delaying the process and paying additional fees to remedy the situation.

Send the Proof of Payment

Your Chinese supplier will likely want to see some type of proof of payment or a payment record. In many cases, your bank will immediately send you a receipt that can act as the proof or payment. If for some reason they don’t send the receipt or it’s missing information (the supplier will likely want to see a payment proof that shows their business name, account number, the transaction date, and the amount paid), an informal PDF copy of the transfer screen itself will likely suffice. Be sure to send this payment record immediately — the supplier may begin working based on this alone, even though it may take 1–5 days for the actual funds to arrive.

Correcting Errors

If you followed all of these instructions, your transfer should be processed and received without an issue. However, even the best businesses make an error or two every so often. If there was an error in the process, in most cases the money will be returned to you, though it can take weeks and you’ll likely lose any fees you paid. You can wait for the funds to be returned to your account, or you can also contact your bank to update the transfer with the correct details; while there may be an additional charge and you’ll likely lose any fees you paid initially, it may be worth it compared to losing weeks of time.

While the telegraphic transfer process may seem daunting at first, it’s one of the oldest and most widely-used financial services in the world. With this knowledge, you’ll be well on your way to becoming a pro at navigating the process and working with your Chinese supplier to guarantee your business’ success.

Are you new to product sourcing or working with new China factories or suppliers?

We recommend you to read from our InSpec by BV insight center with all the latest product recalls, regulatory news, and tips on how to minimise your product risks and management the quality of your products from your fingertips!

In the first example, the user filled in as much of their payee’s name as could fit in the text field, and then moved on. This is incorrect. In the second example, the user added the rest of the name in the first address text field, followed by the address. This is correct.

• You may be tempted just to type in as much of the name that will fit into the text field for payee name, and cut it off there. Don’t! Without an exact name match, Chinese banks are very likely to return your payment. In addition to the added hassle, this will also postpone your ability to send payment by as long as two to three weeks.

– Instead, use the address fields to fill in whatever part of the payee’s name was cut off.

• Double check for any typos. This is especially important for buyers who do not speak Chinese, and for whom a misspelling in a foreign language might not be very noticeable on first glance.

Fraud protection: don’t work hard, work smart!

It’s common for unsuspecting buyers to be swindled by scam artists posing as their supplier. They set themselves up to receive payment for your order “on behalf” of the factory management. However, in reality, they have no actual relationship with your supplier. Once they receive your payment, they’re riding off into the sunset, never to be heard from again. Meanwhile, your real supplier is wondering why you haven’t paid for your order yet.

On the other hand, whereas some inexperienced buyers make the mistake of being too trusting, many others make the mistake of being too suspicious. These buyers assume everybody is out to get them, and even legitimate, licensed export agents or intermediaries are treated like thieves. Whereas these more suspicious buyers may be less likely to cheated, they’re much more likely to unnecessarily delay the payment process, causing frustration and profit loss on both sides of the deal.

• Make sure to get all payment instructions in writing as part of your purchase agreement. And require that any changes to the payment instructions be submitted in writing, signed and countersigned by both you and the supplier.
• If you’re instructed to pay into an offshore account, such as one based in Hong Kong rather than mainland China, verify that the name on the account is similar to the name of the factory you’re dealing with.

– In other words, if the Shenzhen XinYingxin Electronics Technology Co., Ltd. instructs you to wire payment to the Hong Kong XinYingxin Electronics Technology Co., Ltd., there’s no need to be overly suspicious.

– But if you’re instructed to pay into an offshore account whose name does not resemble the factory with which you’ve been doing business already, this should raise a red flag.

• If you’re instructed to pay a third-party export agent, ask for documentation of the agent’s export license.
• Never send payment to somebody’s personal bank account. Only wire money to accounts tied to officially registered businesses.

Plan ahead for bank fees

• If you plan on sending regular T/T payments to China, try negotiating for a lower fee rate with your own bank. Most banks will provide preferential terms on wire transfer fees in exchange for the chance to service all of your overseas payments.

– Even if you don’t yet have specific plans to send payments to China on a regular schedule, there’s no harm in telling your bank that you plan on using this service more in the future. It’s not unusual for a bank to offer lower transfer rates in exchange for even just the chance at a more long term business arrangement.

• Expect every overseas T/T payment to incur outbound bank fees, inbound bank fees and intermediary fees. In other words, your bank, your supplier’s bank and the institution that services the transfer between the two banks will all take their own cut out of your T/T payment.

– Regardless of how you and your supplier plan on handling these fees (will you pay them all? Will they? Will you pay the outbound fees and they pay the inbound fees?), make sure it’s agreed to in writing.

– In most cases, only the outbound bank will have access to the fee schedule of the intermediary bank. So if your agreement requires the supplier to take on any part of this cost, you will probably have to provide them with documentation of it, because they likely won’t be able to look it up from their end.