As the world's manufacturing hub, China continues to attract businesses of all sizes looking to source products and materials. Dealing with Chinese suppliers, however, can sometimes be a daunting task, especially when it comes to making payments.
In this blog post, we will discuss various payment methods, as well as their pros and cons, to help you choose the best option for your international business transactions.
By the end of this article, you'll have a solid understanding of the most popular payment methods and you'll be able to make informed decisions when dealing with Chinese suppliers.
First and foremost, before diving into the different methods to pay your Chinese suppliers, it's important to understand how payments are typically divided during the payment process and the amounts that you should be sending:
As a result, there are typically two separate payments associated with each order, which can lead to additional fees and charges for your business. It's important to consider these additional expenses for two separate payments as the fees can add up.
Additionally, it’s common for suppliers to insist on a higher deposit to lower their risk which subsequently then increases yours. However, never pay your Chinese suppliers more than 30% as a deposit or 100% before production!
By doing so, you would be subjecting yourself to all types of risks as it removes the supplier’s incentive to fulfill quality requirements, meet timelines, or to remake/repair defective items.
When engaging in international trade, it's crucial for buyers to exercise diligence and caution before sending any funds. Taking the time to properly verify a supplier's legitimacy can significantly reduce the risk of scams, fraud, or the chance of receiving low-quality products.
Below are some essential steps to ensure supplier credibility before sending payments:
By taking these additional steps to ensure supplier credibility, you can mitigate the risks associated with sending money to Chinese suppliers and build a strong foundation for successful business dealings with Chinese companies.
Now that you're armed with knowledge of how much money to send to your Chinese suppliers and the essential steps for performing due diligence before making any payments, let's dive into these options to help you choose the best payment method:
Wire transfers are fast (1-3 business days), convenient, generally safe, and one of the most affordable means of transferring funds to suppliers. Since wire transfers are generally accepted by suppliers worldwide, they’re often the best choice for international transactions.
These transfers are typically irrevocable and cannot be recalled by the sender, which is good news for suppliers, but may be bad news for you in the event of quality issues, disputes, or if you’ve realized later on, that your supplier isn’t who they claimed to be.
International transfer fees vary among financial institutions. Some banks charge a fixed fee, while others charge a percentage of the transaction amount. Therefore it's important to verify the costs associated with international wire transfers with your sending bank in advance.
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PayPal is a familiar name for many, offering convenient and rapid transactions through credit cards or linked bank accounts, which makes it an attractive option for businesses wanting to pay suppliers and expedite payment for sample orders or small transactions.
However, despite its ease of use, PayPal does come with higher transaction fees compared to other methods and many Chinese suppliers won't accept PayPal payments for complete or large orders, which limits its use to smaller transactions.
Furthermore, it isn’t a favourite among buyers due to the majority of Chinese suppliers requesting that foreign buyers cover their fees (typically 3-5%) due to high withdrawal fees and restrictions in place within the Chinese market.
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While Western Union (WU) isn't as widely used for sending funds to Chinese suppliers as other payment methods, like wire transfers, it's still accepted by smaller suppliers and allows you to quickly send funds, regardless of where you are located, or whether you make the payment online or at one of their physical locations.
However, while they have measures in place to prevent fraud, it’s notorious for being a favourite among scammers pretending to be legitimate suppliers. Therefore, it's crucial to exercise extra vigilance and perform thorough background checks and due diligence to safeguard your investment.
Lastly, it’s also unusual for suppliers to demand payment through Western Union. If a supplier insists on this method of payment, it could be a strong indicator of either illegitimacy or inexperience on the supplier's part, suggesting they haven't established proper banking for their business.
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Letters of Credit, commonly known as L/Cs, offer a higher level of protection compared to many other payment methods. An L/C is a guarantee from a bank that a buyer's payment to a seller will be received on time and for the correct amount. If the buyer is unable to make payment, the bank will cover the full or remaining amount.
Despite their security, Letters of Credit can be complex and costly to arrange. They also require a thorough paperwork process, which can be a hurdle for many businesses. Therefore, L/Cs are typically recommended for larger orders where the protection they offer outweighs their associated costs and complexities.
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Although less common in today's digital age, cash payments can still be made for small, in-person transactions or when dealing with smaller suppliers locally. Cash offers immediate payment and avoids transaction fees. However, it does carry risks such as the potential for loss or theft, and lacks a reliable paper trail for record-keeping and dispute resolution.
While it may initially seem unconventional in an international business setting, some suppliers might appreciate this straightforward approach. Indeed, your supplier might raise an eyebrow when you pull out a stack of crisp hundred-dollar bills, but in all likelihood, most Chinese suppliers will be more than happy to accept.
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WeChat and AliPay are two of the most popular mobile payment platforms in mainland China. If you're dealing with smaller suppliers, visiting local wholesale markets, or making minor transactions, these platforms can provide quick and convenient payment options.
However, using WeChat and AliPay for international transactions isn't as straightforward as just setting up an account. In order to access and take advantage of the payment features, foreigners are often required to have a Chinese bank account and phone number.
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Utilizing sourcing companies can be an efficient way to handle payments to Chinese suppliers. These companies, located in China, are ideally positioned to act as intermediaries, with their established relationships and in-depth knowledge of the local supplier market.
This local presence of a sourcing company in China also allows them to easily conduct thorough due diligence, ensuring your investments are secure and the suppliers are credible.
However, using a sourcing company does come with additional costs for their services, which could potentially impact your profit margins. Despite the added costs, a sourcing company's expertise, local knowledge, and established relationships can provide significant value, especially when their benefits outweigh the additional costs and time involved.
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Alibaba Trade Assurance is a payment and protection service provided by the e-commerce giant Alibaba. This service is perfect for businesses sourcing products from suppliers on the Alibaba platform. It offers protection for international buyers if the supplier does not meet the terms of the order contract, including quality and shipping time.
The downside of Alibaba Trade Assurance is that it's limited to suppliers on the Alibaba platform. Additionally, while it offers some level of protection, making a claim can sometimes be a lengthy process with no guarantee of a favourable outcome in the event of a dispute.
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To wrap things up, remember that when paying Chinese suppliers, it's always vital to do your homework and conduct thorough background checks before paying suppliers.
The most favoured payment method among importers and suppliers in China is a wire transfer. However, for those smaller to medium-sized transactions, you might find PayPal and Western Union's quick and convenient services more appealing.
Ultimately, the method you choose hinges on your specific needs, the transaction size, and the trust you've established with your supplier. It's a balancing act between speed, convenience, cost, and security.
But equipped with the right knowledge and a dose of caution, you'll be well-equipped to handle this aspect of your business effectively.
March 6, 2024 / General, 101 learning, Installation and testing, Best Practices
Both shielded and unshielded twisted-pair copper cable comes in either stranded or solid wire versions. There are plenty of considerations when it comes to choosing one or the other, including standards, environment, application, and cost. Let’s take a look at the differences and considerations, so you can decide whether stranded copper wire or solid copper wire cable is right for your specific installation.
The first difference between stranded and solid wire cable is in the way they’re made: the terms stranded and solid refer to the actual construction of the copper conductors within the cable.
The second most noticeable difference between stranded and solid wire cable is flexibility.
A less-obvious difference between stranded and solid wire cable is performance.
Now that you understand the differences between stranded and solid wire cable, let’s cover what you need to consider when making a choice.
Which type of wire is the best choice depends on the installation's requirements.
When it comes to 90-meter horizontal permanent links, there’s no choice: whether it's shielded or unshielded twisted pair, both TIA and ISO/IEC standards require solid wire cable. Stranded cable (24 and 26 AWG) is limited to patch cords and 10-meter lengths within a 100-meter channel.
Because stranded cables are more flexible and can withstand bending, they make excellent patch cords for equipment connections and cross-connects where cables are frequently bent and manipulated; at just 10 meters of the channel, the increased insertion loss and resistance aren’t a factor in the overall channel performance. However, smaller 28 AWG stranded patch cords that have even more insertion loss and resistance due to their smaller gauge do have some limitations — get the Skinny on 28 AWG Patch Cords to learn more.
Open office environments, however, are special situations; they’re faced with regular reconfigurations and may require a more flexible cabling system. In those installations, the standards allow stranded patch cords to take up more than 10 meters of the channel. However, if you’re using more than 10 meters of stranded cable in a channel, industry standards require de-rating the overall channel length to accommodate for the greater insertion loss and DC resistance.
When it comes to de-rating stranded cable per industry standards, the overall gauge is a factor: higher-gauge (thinner) cables have a higher de-rating factor. The de-rating for 26 AWG stranded cable is 0.5, while 24 AWG is only 0.2, and 22 AWG stranded cables require no de-rating at all.
Here are the calculations to determine overall channel length, where H=horizontal cable length, D=de-rating factor, C= total stranded cable length and T=total channel length.
For example, if you’re using 60 meters of horizontal solid category 6A cable and 40 meters of stranded 24 AWG category 6A patch cable with a 0.2 de-rating factor, the total length of the channel must be reduced to 97.5 meters. (If you prefer the actual math: total stranded cable length = [105-60]/[1 + 0.2], or 37.5, and total channel length = 60+37.5, or 97.5 meters.) If you’re using 26 AWG stranded cable with a 0.5 de-rating, the channel length needs to be reduced to 90 meters.
While stranded cable is the norm for patch cords at patching areas in the telecommunications room (TR) and at the work area (perhaps longer than 10 meters in open offices), a primary application to consider in today’s LANs warrants the use of solid patch cords: Power over Ethernet (PoE). When PoE is delivered over twisted-pair copper cable, some of the power dissipates as heat. When power dissipates as heat, the cable temperature increases. With higher insertion loss and DC resistance, stranded patch cords are more likely to exhibit degraded transmission performance at elevated temperatures.
While not typically a concern in environmentally controlled spaces like the TR, stranded patch cords could become an issue once you start connecting devices in the ceiling — think wireless access points, security cameras, LED lights, and more. In best practice, if the environment isn’t temperature controlled and the cable doesn’t have to bend much, solid cable patch cords should be used. If you do use stranded patch cords in uncontrolled environments, it’s better to keep them short (about 5 meters or less). And when it comes to higher-temperature environments, industry standards require de-rating channel length for that, too; more cables in a bundle, each generating more heat, can require even more length de-rating (though there can be An Exception to Every Rule).
While more strands in a conductor mean greater flexibility, a higher strand count also means a higher price. To keep costs down, stranded category 6 and category 6A cable are designed to strike a balance: enough strands to maintain proper flexibility, but not so many that it creates a dramatic price difference. You don’t have to compromise performance (or standards compliance) by selecting stranded wire cable instead of solid for environments and applications for which it’s not suited. Keep your stranded cables in environmentally controlled areas that require greater flexibility, and use solid wire cable where rugged performance (and little bending) is required.
Whether it’s patch cords, permanent links, or channels, you can configure a Fluke Networks Versiv™ tool to certify the cable's performance.
View the Versiv Configurator