China - Country Commercial Guide
Trade Financing

It covers payment methods and information on, banking systems, foreign exchange controls, and U.S. and correspondent banking.

Last published date: 2021-02-03

Methods of Payment

In China, there are many ways to finance imports. The two most common methods are letters of credit and documentary collections. No matter what method is used, the Chinese importer needs to apply for the foreign exchange amount for the trade transaction from the State Administration of Foreign Exchange (SAFE).

Letters of Credit

  • Most Chinese commercial banks have the authority to issue letters of credit (L/C) for both imports and exports. Foreign banks with branch or representative offices in China can also issue letters of credit.

Documentary Collections

  • This method of payment is like a letter of credit, but less formal and more flexible. As with letters of credit, the exporter submits a full set of trade documents for payment collection to the bank designated in the contract.  The bank then sends the documents to the home office, which examines them and, in some cases, passes them to the buyer for further examination.  
  • Payment is made after the documents have met the approval of all parties.  This method of payment provides only limited coverage against default.  It can be considerably less expensive than a letter of credit but should be used with caution.  
  • It is the responsibility of the exporter to determine the specific instructions to be used in the collection letter.  

Please refer to the Bank of China for further details and a flowchart of the process.

For more information about the methods of payment or other trade finance options, please read the Trade Finance Guide

U.S. Banks and Local Correspondent Banks

Among the locally incorporated foreign banks in China, there are eight from the U.S. that operate about 80 branches and representative offices in China.

Bank of America Merrill Lynch
BNY Mellon 
Citibank
East West Bank
JPMorgan Chase Bank 
Morgan Stanley Bank International 
SPD Silicon Valley Bank
Wells Fargo

Export Credit Guarantees/Insurance

To reduce financial risk and increase competitiveness, U.S. exporters may choose to explore credit guarantees/insurance options. Available programs will depend upon the type of export. Options include but are not limited to: 

•    U.S. Department of Agriculture Export Credit Guarantee Program (GSM-102)
•    U.S. Export-Import Bank
•    U.S. Small Business Administration