Chinese Import Payment Practices

Letter of Credit 

The Chinese banks that have the authority to issue letters of credit for Chinese imports include the Bank of China, the People's Construction Bank of China, the Industrial and Commercial Bank of China, the Agricultural Bank of China, and the CITIC Industrial Bank. Foreign banks with branches or representative offices in China can also issue letters of credit. 

 

China will not allow letters of credit issued by its banks to be confirmed by other banks, Chinese or foreign.  

 

Document Against Payment 

As with letters of credit, the exporter submits a full set of trade documents of payment collection to the bank designated in the contract. The Chinese bank will send 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. Documents Against Payment provides rather thin coverage against default however it is less expensive than a Letter of Credit, but should only be used between parties that have a long, good and trusting relationship.

 

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