For many buyers, the real decision point in a deal with a Chinese factory is not when you sign the contract, but when you hit “send” on the deposit. Once the money leaves your account, doubts start to creep in: is this company really reliable, will they ship on time and at the promised quality, or will they disappear? The problem is not the idea of a deposit itself. The problem is sending money before you have checked the basics. If you verify a few key items in advance, the deposit becomes a calculated business risk instead of a blind bet.
The first thing is to know exactly who you are paying
Many buyers only remember the factory’s English trade name on Alibaba or the salesperson’s name on WhatsApp, but cannot clearly state the full Chinese legal name and registered address of the company that issues the PI, signs the contract and receives the money. (Read more on how to check Chinese company registration). You should ask for formal company details: full legal name in Chinese, unified social credit code, registered address and corporate bank account information. Then check that the contract party, the PI header and the bank account holder are the same company. The goal is simple: make sure the business license, court records and any blacklist entries you later find all belong to the same legal entity that is actually taking your money.
The second thing is to check the company’s “health status” in official records
In Chinese government credit databases you can see when the company was established, how much registered capital it has, who the legal representative and shareholders are, what its business scope is and whether it is listed as “active” or something like “revoked” or “deregistered”. A common warning sign is being listed in the “abnormal operations” category, which usually means the authorities had problems contacting the company or its filings were not in order. While each case is different, wiring a large deposit to a company with these marks on its file is rarely a good idea.
The third item is litigation and enforcement history
A business license only proves that a company was registered at some point. Lawsuits (people suing the company) and enforcement actions (courts forcing it to pay) show how it has behaved in real disputes. If a factory has a long trail of contract disputes, unpaid invoices and enforcement records, or if it appears on the national “dishonest person” blacklist, it does not automatically mean they are scamming you right now. It does mean that their cash flow and payment habits are weaker than their peers. In that situation you should keep deposits low, insist on clear inspection before shipment, and avoid overexposing yourself on the first order. If you're unsure how to interpret these records, our Background Check Service can help analyze them for you.
The fourth check is to make sure the “factory” is a real production site
Websites and Alibaba stores can look impressive, but what you care about is whether those production lines, machines, workers and warehouses actually exist and match what they claim. Practical ways to verify this include: arranging a live video call during working hours and asking them to walk through the shop floor; asking them to show a specific process or machine nameplate on camera; and comparing the factory sign and address you see in the video with the registered address on the business license and the address on their invoices. For higher-value deals, commissioning an independent on-site audit gives you third-party photos, video and document checks instead of relying only on what the sales rep chooses to show.
The fifth area is how they handle samples and details
Many buyers treat samples as a casual test and believe that “we can fix everything when we place the big order”. In reality, samples are your best low-risk chance to test three things: whether the supplier truly understands your specifications; whether they are willing to follow your preferred way of packing, labeling and documentation; and how they react when there is a mistake. If, at the low-pressure sample stage, they are already careless, slow to respond or keep forgetting details that were agreed, then there is little reason to send a large deposit and hope they will suddenly become reliable later.
The sixth point is to design payment terms that keep your risk within your comfort zone
In practice, any factory that asks for 100% upfront on the very first order (without a strong, industry-specific reason) should be treated with caution. A more balanced structure for a new relationship is something like “30% deposit + 70% balance before shipment or after inspection”, or staged payments tied to production milestones. Your contract should clearly define quality standards, delivery dates and inspection points, and ideally state what happens if the goods fail inspection – for example, rework at the supplier’s cost or agreed discounts. This way, even in a worst-case scenario, you still hold leverage in the form of unpaid balance instead of giving away all your bargaining power on day one.
The final question is whether this particular deposit justifies a professional background check
For a small sample order of a couple of hundred dollars, most buyers are comfortable relying on basic checks and their own judgment. But if the deposit is the first step towards a full container, a new brand launch or the survival of your store, then spending some money on due diligence is usually a rational choice. That can include systematic checks on business registration, shareholders and controllers, litigation and enforcement history, blacklist status, and, where needed, an on-site audit. All of this can be distilled into a short English report that tells you, in plain language, how much risk you are taking. The deposit itself will not change the nature of the factory. What makes the difference is whether you send it with your eyes closed, or after you have seen enough to verify the supplier to decide how much to pay, and when.