Due Diligence
March 2019

Make These 4 Checks Before Sending a China T/T Payment

One of the most common ways to pay a Chinese supplier is to make a China T/T Payment, but it is not a method that comes without risk.

We regularly see cases where Chinese suppliers request payments to individual accounts, third parties, offshore accounts and offshore entities, rather than to their own Mainland Chinese corporate bank accounts.

Before sending a China T/T payment, pause and take a moment to make these 4 simple checks - they will help you ensure your payment is really going to the correct Mainland China entity.

What is a China T/T Payment?

The acronym T/T stands for "Telegraphic Transfer" and is an international bank wire transfer usually made through the SWIFT system.

In this article we are talking about telegraphic transfer payments made by foreign businesses to companies based in Mainland China.

Why Take Care With China T/T Payments?

Before sending a China T/T payment to your Chinese supplier it is important to make yourself aware of some potential pitfalls.

We have seen numerous cases where supposed Mainland China companies have requested T/T payments to be sent to individuals, third parties and entities registered offshore.

More often than not, the reasons for this are not disclosed and the Chinese companies are far from transparent about what is going on.

Following the four checks outlined in this article will help ensure that your payment is really going to the Mainland China-registered entity that you are dealing with.

Before Sending a China T/T Payment Make These 4 Checks

Follow these 4 simple checks to make sure your payment is really going to the Mainland China company you are dealing with:

Check 1: Is the Payee an Individual or a Company?

When you are sending money to a Chinese company you want to make sure you are making payment to their corporate account, not the account of an individual.

Key points:

  • Desired Outcome: Payee is a Company
  • Exercise Caution: Payments to Individuals

How to tell:

View the provided banking details and check if the payee is an individual or a company. If you are not familiar with Chinese names here are some examples:

  • Examples of Chinese Individual Names:
  • GU YU
  • Examples of Chinese Company Names:

Avoid making any China T/T payments to individual accounts wherever possible.

Check 2: Is the Payee the Correct Entity?

You have been dealing with one Chinese company, but when it comes to making payment you are asked to make payment to another company. Unfortunately this happens quite regularly for a wide range of reasons and is certainly something to be very cautious about.

Key points:

  • Desired Outcome: Payee name is consistent with the company you have been dealing with
  • Exercise Caution: When payment is requested to a different company name

How to tell:

Carefully confirm that the name of the company provided as the payee on the bank details is identical to the name of the company you have been dealing with.

Here are some places where the company will have previously given their name -  it is worth checking each and every one:

  • Company website
  • Trade website (e.g. Alibaba)
  • Quotation
  • Invoice
  • Email signature
  • Brochure
  • Copies of certificates & test reports provided

Are they all the same? If not, why not? Ask! Any differences can be very significant and do need to be clarified.

The issue of Chinese company English names is rather complicated and there are circumstances where it is understandable that a Chinese company may have presented their English name in different formats.

On the one hand it is important to remember that in China only names in Chinese are official, however the company does need to provide an English name in order to use the SWIFT system.

If the payee company name ends in the text "Limited" rather than the usual abbreviation "Ltd.", the China T/T payment recipient is quite likely to be a Hong Kong-registered entity. It is quite common for Mainland China companies to operate a Hong Kong trading company and this article explains some of the reasons for this. 

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Check 3: Where is the Bank Located?

If you are dealing with a Mainland China company you should be making your T/T payment to their Mainland China bank account.

Key points:

  • Desired Outcome: Bank is located in the same Mainland China city (or at least province) the company is registered in
  • Exercise Caution: Bank is located in a different province to where company is registered, or in Hong Kong or other overseas jurisdictions

How to tell:

The China T/T payment bank details you have been provided with will specify the name of the bank and the address of their branch which the funds are to be sent to.

This may sound obvious but it is worth emphasizing: Mainland China companies should be requesting payment to their bank accounts which are held with Mainland China banks and located in Mainland China.

In the vast majority of cases these accounts should be held at a branch which is in the same province as the company itself is registered in. I.e. if the company is registered in Shanghai they should be providing the address of a bank in Shanghai, not in Beijing or Hong Kong.

Another thing to consider is the name of the bank. Although many Mainland China banks also have operations in Hong Kong, they are named slightly differently and often have the text "Hong Kong" or "Asia" in brackets at the end of their name.

  • Examples of popular Mainland China banks
  • Agricultural Bank of China
  • Bank of China
  • Bank of Communications
  • Bank of Shanghai
  • China CITIC Bank
  • China Construction Bank
  • China Everbright Bank
  • China Merchants Bank
  • China Minsheng Bank
  • Industrial and Commercial Bank of China
  • Ping An Bank
  • Shanghai Pudong Development Bank
  • Examples of popular Hong Kong banks
  • Bank of China (Hong Kong)
  • Bank of Communications (Hong Kong)
  • China CITIC Bank International
  • China Construction Bank (Asia)
  • Hang Seng Bank
  • Hongkong and Shanghai Banking Corporation
  • Industrial and Commercial Bank of China (Asia)
  • Shanghai Commercial Bank
  • Standard Chartered Hong Kong
  • The Bank of East Asia
  • Wing Hang Bank

If you are being asked to make payment to a bank account outside of Mainland China you are almost certainly not making payment directly to the Mainland Chinese company.

Check 4: Is it an Onshore or Offshore Account?

Even if the last 3 checks come back positive you still need to watch out for offshore accounts held in Mainland China. 

Key points:

  • Desired Outcome: Payment to a standard Mainland China onshore account
  • Exercise Caution: Sending payment to an offshore bank account

How to tell:

So you're confident you are dealing with the correct company's Mainland China corporate account, that should be fine right? Not so fast!

Look closely at the bank account number you have been given. Usually it should contain only numbers and be 19 digits long.

However, if the account number has a 3-letter prefix (usually "OSA"), it is an offshore account.

  • Explanations for the various prefixes:
  • OSA (Offshore Account)
  • NRA (Non-Resident Account)
  • FTN (Free Trade Non-Resident)

Another way to tell is that as far as we are aware there are only 4 Mainland China banks which offer "OSA" offshore accounts and each has a dedicated SWIFT code for their offshore banking unit.

  • The 4 banks in Mainland China offering "OSA" offshore accounts are identified below:
 Chinese Bank Offshore Banking Introduction Offshore Banking Unit SWIFT Code
Bank of Communications Link COMMCN3XOBU
China Merchants Bank Link CMBCCNBS008
Ping An Bank Link (Chinese language only) SZDBCNBSOSA
Shanghai Pudong Development Bank Link SPDBCNSHOSA

Note there are also many domestic banks that offer NRA accounts, including the Xiamen International Bank and the Industrial Bank, as well as some international banks operating in Mainland China.

What is happening here?

If a Mainland China company is requesting payment to these kinds of offshore bank accounts, you are actually making payment to an offshore company - not the Mainland China entity you thought you were paying.

This is how it works: a Chinese individual/company establishes an offshore company and gives it an official English name (and sometimes a Chinese name too) which is identical to their Mainland China business  That offshore entity then registers an offshore account with a Mainland China bank.

In situations like this the entity you are making payment to is often registered in a "tax haven" such as the British Virgin Islands or the Cayman Islands.

Why is this a problem? Because you need to have recourse with the Chinese company if & when things go wrong.

Here is a quote from this excellent article by Dan Harris:

Before contracting with anyone, you should do your due diligence and make sure the party you are paying is not a shell entity or a sourcing company with little or no assets.

If you are being asked to make a China T/T payment to this type of account it should raise some alarm bells, and you are absolutely entitled to ask some hard questions.

Verifying Chinese Companies

If you have received a request for payment from a Chinese company and are in any doubt it is always worth performing a verification.

Our China company verification service can help you identify China T/T payment issues such as covered in this article - simply upload the invoice in question when submitting an order and we will review for you.

Further reading