Can’t Get Payment Terms from Chinese Suppliers? Export Credit Insurance Is the Missing Piece

You found a supplier in China. Good product, fair price, responsive team. Then you reach the payment terms, and the conversation stops:

“We only accept 30% T/T deposit, balance before shipment.”

Or: “L/C at sight, sorry.”

It’s not that they don’t like you. It’s that your order is one of maybe fifty they’re shipping that month, and every open account invoice is a bet they can’t afford to lose. One unpaid shipment wipes out the profit on several others. So they default to the two options that feel safe on their side: prepayment, or a letter of credit — both of which tie up your working capital and slow you down.

Here’s the part most overseas buyers don’t know: there’s a mechanism that changes the supplier’s math entirely. It’s called export credit insurance, it’s been offered in China for decades, and it’s the reason a growing number of Chinese exporters are willing to say yes to open account terms.

How the insurance actually works

Export credit insurance protects a seller against the risk of not being paid. In China, this is a regulated product offered by licensed insurers. One of the main providers is PICC Property and Casualty (PICC P&C), part of the PICC Group — a Fortune Global 500 company and one of the world’s largest P&C insurers — which in 2013 became the first commercial insurer in China licensed to underwrite short-term export credit insurance.

The mechanics are simpler than they sound:

1. The Chinese exporter takes out a policy covering its export receivables — typically sales on L/C, D/P, D/A or open account.
2. The insurer underwrites you, the buyer. The exporter applies for a credit limit on your company. The insurer checks your registration, financials, trading history and country risk — and issues the limit in writing, one buyer at a time.
3. If approved, the insurer sets a credit limit — the maximum amount of exposure to your company that the policy will cover at any one time.
4. You trade on open account within that limit. If you genuinely can’t pay because of insolvency, protracted default, or a covered political event (such as currency transfer restrictions in your country), the exporter claims on the policy and recovers the agreed share of the loss.

That last number is the one that matters to you. When a supplier knows that a default by you costs them, at worst, a small fraction of the invoice instead of the whole thing, open account stops looking reckless and starts looking like normal business.

What a real Chinese policy actually says

To make this less abstract, here are the key parameters from a standard short-term export trade credit policy written by PICC P&C — the kind of policy we routinely see attached to non-L/C export shipments from China:

• Indemnity: up to 90% of the insured loss. The 90% rate applies across the board — to L/C-related defaults, to buyer refusal to take delivery, to other commercial risks (insolvency, protracted default), and to political risk events.
• Maximum payment term: 90 days from shipment, on this particular policy. (The product itself allows longer terms — up to one or two years — but most policies cap the buyer’s payment window at 30, 60 or 90 days, which is exactly what overseas buyers actually need.)
• Aggregate indemnity cap: 50 times the actual premium paid over the policy year. That sets a hard ceiling on the total the insurer will pay out across all covered buyers.
• Per-buyer credit limit: set in writing by the insurer, after a credit investigation. The investigation fee is a fixed per-buyer charge (commonly around RMB 600), paid by the supplier.
• Coverage scope: worldwide, USD- or RMB-denominated export sales, real shipment of physical goods only. Paper transactions that don’t move real goods are not covered.
• Reporting: real-time — every shipment must be declared to the insurer as it goes out, so the cumulative exposure is always tracked against the policy limits.
• Validity: 12 months, renewable.
• Exclusions that matter for buyers: losses arising from sanctioned countries, parties on UN/EU/US sanctions lists, or transactions that would breach a relevant court’s immunity rulings are excluded. The policy is not a back door around compliance.

You’ll also see some non-obvious conditions that affect how the policy behaves in practice:

• The supplier must insure all of its qualifying export business with this insurer, not a cherry-picked subset. Skipping this can reduce the indemnity on a claim.
• The supplier can’t double-insure the same receivable with another credit insurer. There’s one policy per shipment.
• The policy applies to genuine, arm’s-length shipments. If the buyer is related to the supplier, or the transaction is between affiliated parties, the loss isn’t covered.

Those details don’t make the headline less attractive. They just mean a buyer who knows how the policy is actually structured can have a much more honest conversation with the supplier and the insurer from day one.

What this means for you as the buyer

If your company is creditworthy — established, well-run, with a clean payment record — export credit insurance can quietly work in your favour:

• Real payment terms. Instead of prepaying every order, you can negotiate 30, 60 or 90 days. Your cash stays in your business longer.
• A third-party endorsement of your credit. When a Chinese insurer approves a credit limit on your company, that’s an independent, institutional opinion that you’re good for the money. Suppliers talk to each other; a clean credit file in China is a commercial asset.
• Bigger orders, better leverage. Suppliers who aren’t worried about getting paid are easier to negotiate with — on pricing, on MOQs, on production slots.
• Room to grow. The limit isn’t static. Trade well and your suppliers (and their insurers) will typically be willing to raise it over time.

What you’ll be asked to do

None of this happens by magic. When a supplier applies for a credit limit on your company, expect to provide:

• Your company registration documents and ownership structure
• Recent financial statements (audited if available)
• A summary of your purchasing history and payment record — with this supplier and others
• Basic information about your market and how you distribute the goods

Think of it as a credit check — because that’s exactly what it is. The better and more complete the information you provide, the faster and higher the limit is likely to be.

One more thing: payment discipline matters more than ever once you’re on open account. The insurer is watching the same payment behaviour you’re showing the supplier. Pay on time, every time, and the relationship (and your limit) grows. Slip up, and both the supplier and the insurer will notice.

Four things overseas buyers often misunderstand

1. The policy protects the Chinese exporter, not you. The insured party is the seller; claims are paid to them. It’s not a guarantee that protects your company — it’s what makes the seller comfortable giving you credit. Don’t ever treat an insured invoice as “soft” debt. Defaulting on an insured invoice triggers a claim, and the insurer — which has far more collection power than an individual exporter — will come after the money.

2. It’s not a licence to pay late. Protracted default (slow pay beyond the agreed terms) is itself an insured event. The insurer’s job is to recover from buyers who don’t pay. Your reputation with Chinese insurers and suppliers is a real, trackable asset — protect it.

3. Disputes over goods aren’t covered. If you reject a shipment or withhold payment because of quality or quantity problems, that’s a commercial dispute, not an insured event. Raise issues in writing, follow the contract’s dispute procedure, and resolve them before payment becomes an issue. Genuine disputes are expected in trade; silent non-payment is not.

4. Nobody can “guarantee” you a limit. Credit limits are the insurer’s independent underwriting decision, based on your file and country risk. A good facilitator can prepare the application properly, but anyone who promises a specific outcome is overselling.

5. Sanctions come first. Insurance payouts are excluded for any transaction touching sanctioned countries, sanctioned parties, or jurisdictions operating under immunity rulings. If your business is in or near a sanctioned geography, this matters more than the credit terms. Confirm the path with the insurer before assuming a policy applies.

Why Rheaura

Rheaura is a China-based business services firm in Qingdao with three decades of experience working between international buyers and Chinese industry. When it comes to arranging credit terms with Chinese suppliers, we act as the coordination layer on the ground:

• Supplier selection and due diligence — we help you shortlist manufacturers that are the right fit, including their willingness and suitability for insured open account arrangements
• Introducing the credit insurance route — we explain the mechanism to suppliers who aren’t familiar with it, and connect them with insurers such as PICC P&C
• Preparing your credit file — we help you assemble the registration, financial and trading documentation that insurers need to underwrite your company
• Negotiating the terms — we sit on your side of the table (or the video call) while payment terms, limits and pricing are worked out

We don’t underwrite, and we don’t replace the insurer’s own due diligence. What we do is make the whole process comprehensible, faster and more likely to end in terms you can build a business on.

The practical path

If you want to move a Chinese supplier from “T/T only” to 60 days open account, the realistic sequence looks like this:

1. Pick the supplier and the order volumes you want to grow
2. Have your company file ready (registration, financials, trade references)
3. Ask whether the supplier has — or would consider — short-term export trade credit insurance
4. Get Rheaura involved early; we’ll handle the supplier conversation and the insurance paperwork coordination
5. Start with a modest limit, prove the payment record, and grow it

Credit insurance won’t turn a weak buyer into a strong one. But if your company is genuinely solid, it’s very often the missing piece that unlocks payment terms you were told were impossible.

This article is for general information only and does not constitute insurance, financial or legal advice. Export credit insurance products, coverage and underwriting decisions are governed by the terms of each policy and the applicable regulations of the People’s Republic of China. Coverage is subject to insurer approval and to applicable sanctions and compliance rules.