A Buyer's Checklist Before the First Deposit Moves

Posted October 11, 2026 · By Li Xinlei (Aaron Li), Partner, H&C (Jinan) Law Firm

Almost every deposit loss I have handled was preventable at the contracting stage, and the fixes were inexpensive at the time. What follows is the version of that observation a buyer can actually use: twenty items in five sections, ordered the way a transaction runs, with the consequence of each omission noted. It is not a substitute for advice on a particular counterparty. It is the list I would want a buyer to have completed before the first payment leaves.

The short answer

Check the entity before the contract, the contract before the payment, and the payment before the goods move. The four items that most often decide whether a later claim can be recovered are: that the entity in the registry is the entity receiving the money; that the contract names a specific arbitral institution; that payment is staged against inspection; and that you hold the supplier's exact Chinese name and Unified Social Credit Code.

Section 1 — The entity

1.1 Obtain the supplier's exact registered Chinese name and its 18-character Unified Social Credit Code. An English trading name cannot be used to file a claim in China, and it will not return a result in the registry.

1.2 Confirm the company is in normal operation and not on the abnormal operation list, in liquidation, or deregistered. How to read these fields is set out in reading China's public registry.

1.3 Read the registration date and shareholder contribution record together. A recent incorporation described as a long-established producer, or registered capital that is subscribed but not paid, are facts about what the counterparty actually is.

1.4 Confirm the goods fall within the registered business scope, and identify who is authorised to bind the company — if your contact is not the legal representative, obtain written authorisation from the contracting entity.

Section 2 — The contract

2.1 Ensure the same legal entity signs, invoices and receives payment. Where these differ, require the relationship to be documented in writing before signing.

2.2 Check the dispute resolution clause names a specific arbitral institution, a seat, a language and a cost allocation. A clause that refers vaguely to arbitration, or offers a choice between arbitration and litigation, is likely to be invalid in China. Drafting notes are in an arbitration clause that holds up in a Chinese court.

2.3 Check the conformity and warranty clause states the specification as measurable facts, not as descriptions. "High quality steel" is not a term a tribunal can enforce; grade, standard, tolerance and testing method are.

2.4 Check the acceptance clause sets a defined acceptance test and a period long enough to run it. A short or absent acceptance window is the buyer's own deadline, and it expires long before any limitation period.

Section 3 — Payment

3.1 Structure the payment so that no more than a modest portion is unsecured — ideally tied to production milestones or pre-shipment inspection.

3.2 Confirm the beneficiary name on the payment instruction matches the contracting entity. Payment to a third company or an individual breaks the only chain that makes a claim collectable.

3.3 Confirm the bank account is in the contracting company's own name and held at a bank in mainland China, so that a domestic freeze is possible if it becomes necessary.

3.4 Agree in advance what happens if the order fails — refund terms, timelines and the forum. A supplier who resists a named institution, staged payment and matching bank details is telling you how it expects the relationship to end.

Section 4 — Inspection and evidence

4.1 Decide who inspects, where, and against what standard, and write it into the contract. For metals this is a named surveyor and method; for chemicals, a sampling and laboratory protocol; for machinery, a defined acceptance test.

4.2 Where the order justifies it, commission pre-shipment inspection and require the report to be issued before the balance is released. The different checks available, and what each one catches, are compared in legal due diligence vs a factory audit.

4.3 Arrange to retain evidence at the point of delivery: sealed samples for chemicals, weighbridge and loading records for bulk goods, uncut video for equipment. Evidence that is not preserved at delivery generally cannot be reconstructed later.

4.4 Establish in advance who bears the cost of a failed inspection, and whether it is deducted from the balance or claimed separately.

Section 5 — Logistics and documents

5.1 Confirm the shipping documents you will receive — bill of lading, packing list, certificate of origin, certificate of analysis, insurance — and that each is issued by or traceable to the contracting entity.

5.2 Check the consignee and notify party details, and whether the original bill of lading gives you control of the goods.

5.3 Where a letter of credit is used, check the documentary requirements against what will actually be issued. Discrepancies are decided by documents, not by the goods.

5.4 Keep a single transaction file, dated, containing the contract, the registry output, the payment confirmation, the inspection records and the full correspondence — including screenshots that show the counterparty's identity, not only the message text.

How to use this list

The sections are ordered by cost of omission, not by effort. Sections 1 and 2 cost almost nothing to complete and remove the largest category of loss — trading with an entity that was never in a position to be held responsible. Section 5 is largely administrative.

If you complete only four items, complete 1.1, 2.1, 2.2 and 3.2. Between them they establish that the company exists, that it is the entity you are dealing with, that you have an enforceable forum if something goes wrong, and that the money follows the contract.

And if a supplier refuses to co-operate with any of this, treat the refusal as the finding. Genuine suppliers in China accept staged payments, inspection before balance and bank details that match the contract. Resistance to those three points is not a negotiating position.

Frequently asked questions

Is this checklist necessary for a repeat order?

Not in full. For repeat orders with an entity whose performance and payments have been consistent, the entity and contract sections can be reviewed periodically rather than every time. The payment sections should be re-verified whenever bank details change — a change of beneficiary is a common fraud vector.

What if the supplier is an individual or a sole trader?

Then the analysis changes: there is no registered capital, no business scope and no corporate veil, and enforcement runs against the individual. Establish identity documents, verify the name on the receiving account, and assume the entity checks in Section 1 must be replaced with identity verification.

Can a Chinese lawyer complete this on my behalf?

The registry and contract review can be done remotely with the documents. What cannot be done remotely is a physical factory inspection, which requires attendance or a third-party inspector on site — and the two exercises answer different questions, as set out above.

How long does completing this take?

Sections 1, 2 and 3 can usually be completed within days once the supplier provides its registration details and the draft contract. The constraint is normally the supplier's willingness to provide them, which is itself informative.

Twenty items now, or the same twenty questions later without the leverage

Send me the supplier's exact Chinese name or credit code, the draft contract and the payment instructions. You will get a written view of where the chain breaks, what the contract is missing and which items need an answer in writing before money moves.

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About the author

Li Xinlei (Aaron Li) is a partner at H&C (Jinan) Law Firm in Jinan, Shandong, where he acts for foreign companies and individuals in international trade disputes, cross-border enforcement and construction claims. He has five years of international engineering and market development experience in the Middle East and South Asia, and writes on China trade lawyer practice for buyers rather than for search engines.

Originality statement: This article is based on matters handled by the author and is intended to provide general legal information and practical reference. For reprinting or citation, please indicate the original source (this website link / article link) and the author's information. We respect original creation and knowledge sharing, but firmly oppose any form of infringement.

Disclaimer: This article provides general legal information and does not constitute legal advice for any specific case. The checks appropriate to a transaction depend on the product, the order value and the counterparty. Please consult and appoint a qualified lawyer for your own case.