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Deposit and balance payment is one of the most common structures in China sourcing. A supplier may ask for a 30% deposit to start production and a 70% balance before shipment. Other ratios, such as 50/50 or 20/80, also appear.

Statute Arts. 586-587 deposit rules

Under the PRC Civil Code, a deposit agreed as security is capped at 20% of the main contract value; a breaching recipient must repay double, a breaching payer forfeits it. See Articles 586-587www.court.gov.cn中华人民共和国民法典 - 中华人民共和国最高人民法院最高人民法院政务网站,最高人民法院网，最高人民法院，最高人民法院网是人民群众了解和联系最高人民法院的重要窗口，承载着司法公开、法治宣传、服务群众、接受监督等重要使命。是最高人民法院的政务网站，是最高人民法院在互联网上唯一的正式身份。www.court.gov.cn.

The ratio itself is not the main issue. The real issue is when each payment is triggered, who receives it, and how much control the buyer keeps after paying.

The short definition

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.

Term Dingjin vs prepayment

Chinese practice separates a statutory deposit (dingjin), which carries the Civil Code forfeiture rules, from an ordinary prepayment (yufukuan), which is generally refundable. The contract wording decides which regime applies.

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.

Deposit-stage risk

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.

Statute Arts. 563 and 566 rescission

If the supplier never performs, Civil Code Article 563 allows termination when the breach defeats the contract purpose, and Article 566 supports restitution of what was paid. Both depend on provable notice and evidence.

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

Evidence Verify entity and account

Check the registered name and credit code in the National Enterprise Credit Information Publicity Systemwww.gsxt.gov.cnwww.gsxt.gov.cn, then pay only the corporate account matching that entity. Personal or third-party accounts break the payment trail.

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.

Balance-stage risk

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.

Statute Arts. 620-621 inspection notice

The Civil Code expects the buyer to inspect within the agreed period and notify the seller of any non-conformity on time. A written pre-balance inspection clause makes both the milestone and the notice duty concrete.

Common mistakes

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.

The bottom line

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.

References

  1. Supreme People’s Court, PRC Civil Code, including Articles 563, 566, 577, 586-587, and 620-621: https://www.court.gov.cn/zixun/xiangqing/233181.htmlwww.court.gov.cn中华人民共和国民法典 - 中华人民共和国最高人民法院最高人民法院政务网站,最高人民法院网，最高人民法院，最高人民法院网是人民群众了解和联系最高人民法院的重要窗口，承载着司法公开、法治宣传、服务群众、接受监督等重要使命。是最高人民法院的政务网站，是最高人民法院在互联网上唯一的正式身份。www.court.gov.cn
  2. State Administration for Market Regulation, National Enterprise Credit Information Publicity System: https://www.gsxt.gov.cn/index.htmlwww.gsxt.gov.cnwww.gsxt.gov.cn

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?.

Frequently Asked Questions

What does 30/70 payment mean?

It usually means the buyer pays a 30% deposit first and the 70% balance after production or before shipment. It is a commercial habit, not a fixed legal rule.

What should I check before paying the deposit?

Check the supplier business license, Chinese name, chop, bank account, order documents, and payment terms for consistency.

When is it safer to pay the balance?

The balance should usually be tied to inspection approval, shipping documents, loading, or another verifiable milestone, not only the supplier saying the goods are ready.