Chinese Company Due Diligence Before Payment

China legal answer: Before paying a Chinese supplier or business counterparty, a foreign buyer should verify the Chinese legal name, unified social credit code, business license, bank account consistency, business scope, litigation and enforcement history, company chop, signatory authority, and whether the contracting party, invoice issuer, payment recipient, manufacturer, and shipper are the same or properly connected.

Due diligence before payment is usually cheaper than trying to recover money after a supplier disappears, refuses to ship, changes its bank account, or denies responsibility.

1. Verify the Chinese Legal Name

An English trade name is not enough. Many Chinese suppliers use brand names, factory names, export names, platform names, or informal English names that do not identify the legal company. The buyer should ask for the Chinese registered name and unified social credit code.

The Chinese legal name should be compared against the contract, purchase order, pro forma invoice, business license, company stamp, bank beneficiary, email signature, platform profile, and shipping documents.

2. Review the Business License

A Chinese business license can help confirm the company’s registered name, unified social credit code, legal representative, registered address, business scope, company type, and registration status. The buyer should not rely only on a screenshot if the order value is significant.

If the business scope has no connection to the goods or services, or the address and contact details do not match the supplier’s story, the buyer should investigate further before payment.

3. Check the Bank Account and Beneficiary Name

The bank beneficiary should match the contracting supplier unless there is a clear written reason. Payment to a different mainland company, Hong Kong company, personal account, or third-party trading company can create recovery problems if the supplier later denies receipt or refuses delivery.

4. Confirm Company Chop and Signatory Authority

In China, a company chop may be important evidence that a company accepted a document. The buyer should check whether the contract or confirmation is chopped by the correct Chinese company and whether the person signing has authority to bind that company.

A contract signed only by a salesperson, without a correct company chop or clear authority evidence, can become harder to enforce if the supplier later denies responsibility.

5. Check Litigation and Enforcement History

Before paying a large deposit or balance, the buyer should check whether the Chinese company has court cases, enforcement records, abnormal business status, unpaid judgments, tax or regulatory issues, or a pattern of supplier disputes.

A company with enforcement problems may still accept orders, but the buyer should understand the risk before sending money.

6. Compare the Transaction Parties

The buyer should identify whether these are the same entity or different entities:

contracting party;
invoice issuer;
bank account beneficiary;
manufacturer or factory;
exporter of record;
shipper on transport documents;
seller on the platform account;
company using the email domain or WeChat account.

If several entities are involved, the buyer should document their relationship and authority before payment.

7. Review the Contract Before Payment

A short invoice may not protect the buyer. Before payment, review product specifications, quality standard, inspection rights, delivery date, Incoterms, warranty, refund, replacement, dispute forum, governing law, language, evidence, and remedies.

8. Watch for Red Flags

Common red flags include:

the supplier refuses to provide its Chinese legal name;
payment is requested to a personal or unrelated account;
the bank account changes shortly before payment;
the business license name does not match the invoice or contract;
the supplier pushes urgent payment while avoiding written confirmation;
the company has serious enforcement or abnormal operation records;
the salesperson claims the contract does not need a company chop;
the supplier avoids inspection, samples, or written specifications.

9. What If Payment Was Already Made?

If payment has already been made and the supplier refuses to ship, denies receipt, or refuses refund, preserve payment records and communications immediately. The buyer may need a demand letter, negotiation strategy, litigation assessment, arbitration review, or recovery plan.

10. When to Contact a China Lawyer

Legal review is useful when the order value is significant, the supplier identity is unclear, payment will go to a third party, the contract is thin, the buyer needs a Chinese or bilingual contract, or the buyer wants to understand recovery risk before sending money.

Guangdong Pingwei Law Firm assists foreign buyers with Chinese company due diligence, supplier verification, payment-risk review, contract review, demand letters, supplier disputes, litigation, arbitration, and recovery strategy.

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