How to pay Chinese suppliers from Singapore?

How to pay Chinese suppliers and manufacturers from Singapore?

Businesses face a myriad of challenges when paying Chinese suppliers. Here are five payment methods to consider, and their pros and cons. 

In 2022, China emerged as Singapore’s top trading partner, with total trade between the two countries reaching S$175 billion. This highlights the importance of paying Chinese suppliers and partners cheaply and quickly. 

In this, Singaporean businesses face numerous obstacles, including a strict declaration process, currency controls, compliance regulations, forex risk and high fees, as well as language barriers in navigating paperwork.

Another challenge stems from China’s anti-money laundering laws that require Chinese banks and financial institutions to report cross-border wire transactions exceeding 200,000 USD in a day. Such transactions are often split up into several smaller ones as a workaround.

That’s on top of the exchange rate fluctuations facing local businesses with transactions in and out of China. There are two forms of Renminbi—CNY, used within the mainland, and CNH, used when making offshore payments to Singaporean businesses. While you can send money in CNY, you’ll likely receive CNH when receiving money from a Chinese business. As CNH follows a free-floating exchange rate determined by the market, switching between CNY and CNH creates further unpredictability to bottom lines. We’ve covered the distinctions between CNY and CNH in another article here. 

5 ways to pay your Chinese suppliers in RMB, and their pros and cons

An international wire transfer from your bank is the most conventional way to pay Chinese suppliers at present. However, this method is not without its disadvantages, such as higher fees and longer transaction times. We discuss this and four other ways of paying suppliers in China. 

Pay suppliers in China using Airwallex

Airwallex offers a safe and low-cost way to pay suppliers in China easily and quickly, thanks to several capabilities. 

With the ability to receive CNY directly from China, hold CNY in the included digital wallet, and pay in CNY, Airwallex allows companies to bypass FX conversion fees, creating a cost saving for businesses with customers, employees or vendors on the mainland. As Airwallex offers customers the ability to hold funds in multiple currencies, including CNY and CNH, this effectively eliminates the exchange rate fluctuations by holding funds in the currency they need to use.

Another way Airwallex helps businesses save is by enabling global fund transfers like a local, avoiding costly international transfer fees. Essentially, companies can transfer CNY directly into China at no cost. Note, though, that local CNY transfers can only be initiated by a Chinese national, in accordance with prevailing laws.

With Airwallex, payments to Chinese suppliers and manufacturers can also be conducted with faster speed. Transactions can be completed within one working day, whereas other payment networks may take up to three working days or more. 

Pay using Paypal 

While Paypal payments have become more widespread, using Paypal in China comes with some problems. 

Perhaps the most detrimental one is that Chinese suppliers do not accept large amounts paid using Paypal. You find yourself only being able to pay for product samples or small orders. 

Paypal charges a fixed fee equal to a percentage of your total order value, on top of an FX conversion fee which is determined in-house. This fee structure means that bulk orders will cost a hefty amount, in contradiction to established logistics principles where the more you ship the less you pay. 

While the platform offers buyer protection, Paypal’s complicated policies for overseas transactions mean a potentially longer wait in the event of a dispute.

In contrast, Airwallex offers highly competitive CNY conversion rates that provide up to 90% savings on transaction fees. Dispute resolution is also quicker—you can expect a reply within one working day from our team. 

Make payments via Alipay or WeChat

Alipay is the dominant payment method in China and is widely used by merchants, vendors and suppliers, making it a popular choice for Singaporean businesses to pay their suppliers on Alibaba or Taobao.

To make a cross-border payment, your vendor will first need to activate Express Money Transfer on their Alipay account. Once done, you can proceed with making the transaction with your Alipay or WeChat account accordingly using the funds available in your account. 

This solution isn’t without its problems. For one, payments can only be made to an individual Alipay account, and not a business account. For another, there are limits to how much may be transferred each time, along with an overall annual limit of 500,000 RMB. Further complicating things, your Chinese supplier can only accept up to five transactions every month. 

Pay suppliers via credit or debit cards

Another way local businesses can pay Chinese suppliers is via credit or debit cards, but these payment methods in China are not widely accepted. You might face difficulty getting your Chinese business partners to accept cards payment. 

This is because credit card companies typically charge a high transaction fee, which is levied on the seller or merchant. There are also high FX conversion fees that further eat into the seller’s revenue, rendering credit cards an unpopular choice among Chinese manufacturers and suppliers. 

You can still use credit cards as a payment method in China by linking your business credit cards to Alipay and using the platform to make the required payments. 

You can also connect the Airwallex Borderless Card to Alipay; doing so will allow you to access our market-beating currency conversion rates that lower your transaction costs.

Make a wire transfer to China 

Cross-border bank transfers, also known as wire transfers, are a common way to pay suppliers in China. Wire transfers to China from Singapore are performed using the SWIFT network, which requires the sender to provide the relevant information, such as the receiver’s personal details and SWIFT code. Find out more about what SWIFT Payment Network is and how it works here.

While this is a reliable way to pay your suppliers in China, there are two disadvantages to deal with. 

One, SWIFT transactions can be subject to several rounds of handling fees, especially if there are multiple intermediaries involved between the sender and the receiver—a situation that is not uncommon. Your bank may waive its own charges, but intermediate parties may still levy fees on your transaction along the way.

Two, because of the way the SWIFT network works (the technology is over 50 years old today) cross-border payments take time to complete. It is not uncommon for your payment to take up to three days or longer to be completed.

Newer fintech solutions like Airwallex also make use of the SWIFT network, but can complete transactions at higher speed and lower cost. This means sending your transactions using Airwallex gives you reliability, speed and cost savings. 

How you can start paying your Chinese suppliers quickly and safely 

Between high transaction fees, unfavourable conversion rates, and long lead times, local businesses face multiple challenges in paying their Chinese partners. Regulatory requirements that cap payment limits further complicate what should be a simple task.

Airwallex helps Singaporean businesses like yours avoid the worst of these problems, bringing down costs and speeding up payment with the power of fintech. With our recent acquisition of a payment business licence in China, Airwallex is more well-positioned than ever to support your China business goals.

Follow these steps to start paying your Chinese suppliers with Airwallex:

1. Sign up for a free Airwallex Business Account and open foreign bank accounts online in 12 countries and regions (e.g. SGD, CNY, USD, AUD, EUR, GBP, CAD, JPY, HKD, CHF, NZD, IDR).

2. Top up your balance by transferring any of these 12 currencies to your Airwallex Account.

3. Make a new transfer to China by clicking “New Transfer”. 

4. Enter the amount of CNY that you want to convert and transfer, and the details of the recipient’s China bank account.

5. Track the progress of your conversion and transfer in real-time with live updates

Save up to 90% when paying your Chinese suppliers. Get started with a free Airwallex account today.