What Is Deposit and Balance Payment in China Sourcing? The 30/70 Risk

Deposit and balance payment divides the order amount into at least two payment milestones. The first payment usually secures the order, materials, or production slot. The second payment usually occurs after production, inspection, loading, or before shipment.

This structure is common because suppliers do not want to fund all production costs, while buyers do not want to pay the full amount upfront.

At the deposit stage, the buyer’s main risk is that there are no goods yet and little practical control. Once money leaves, recovery becomes harder if the supplier identity is unclear, production capacity is uncertain, or the contract is thin.

Before paying a deposit, confirm the registered Chinese name, Unified Social Credit Code, chop, contract or PO, PI, and bank account.

If the supplier asks for payment to a personal account, unfamiliar third-party account, or suddenly changed account, do not confirm only by email. Verify through an independent channel and require written explanation.

At the balance stage, the main risk is paying too early.

If you pay the balance before inspection, the supplier has less incentive to fix problems. If the goods have left China, rework, return, replacement, and claims become more expensive.

The balance should be tied to clear milestones: passed third-party inspection , photo and video confirmation, loading supervision, draft bill of lading, commercial invoice, packing list, or other verifiable documents.

The buyer focuses on price and ignores who receives the money.

The PI states deposit and balance but says nothing about delay, defects, cancellation, refund, or reinspection.

The supplier says the balance must be paid before inspection, and the buyer has no leverage left.

The buyer pays the balance and later discovers packaging, labeling, quantity, or specification problems.

The bank account changes by email, and the buyer does not verify through a known channel.

A deposit-balance structure is normal. The risk is treating payment as a routine step rather than a control tool.

Before the deposit, confirm the entity. Before the balance, confirm the goods. Ratios can be negotiated, but triggers must be written clearly.

If you are preparing to pay a Chinese supplier deposit or balance and are unsure whether the structure is safe, contact me.

This article is part of the China Legal Glossary series. Related reading: Your Supplier Ghosted You After Deposit, What Is a China Business License?, and What Is Quality Inspection in China?.