EU b2b exporter → China

A mid-market European industrial supplier sold custom components to distributors in mainland China. Orders were healthy, margins solid—yet cash conversion dragged. Buyers asked for RMB pricing and friendlier risk terms than 100% prepayment in USD. Wires got stuck in correspondent chains, bank questions delayed releases, and refunds—when quality issues arose—were slow and expensive. The exporter rebuilt its flows around CNY-first collections, a milestone escrow for larger tickets, and an internal FX policy that separated the buyer experience from treasury choices. The result: faster collections, fewer disputes, and predictable repatriation to EUR.

Where the friction came from

• All-upfront USD wires. Chinese buyers faced FX spread uncertainty and extra fees; some under-paid invoices after intermediary charges.
• Document ping-pong. Banks asked for contracts, invoices, packing lists, HS codes, CIQ/clearance evidence—often after the payment was sent. Funds sat in suspense while operations dug up scans.
• Refund pain. When returns or partial credits were due, pushing money back cross-border created audit overhead and vendor fatigue.
• Sales pushback. Distributors wanted RMB pricing and trade-friendly milestones (deposit → shipment → acceptance), not a binary 100% prepay.

The exporter didn’t need exotic instruments; it needed a model that matched trade realities without sacrificing control.

The target model at a glance

1. Two commercial paths:
   • Standard orders (repeat SKUs, low customization): CNY prepayment in full, paid domestically by the buyer into a structured collection account linked to the exporter.
   • Project orders (custom work, higher ticket): Milestone escrow—30% deposit to start fabrication, 60% released at shipment against documents, 10% after acceptance (or within a fixed day count), all held and released by rules.
2. CNY first, EUR later. Buyers pay in CNY via domestic rails (with cross-border settlement handled by the provider/bank). The exporter converts to EUR in timed sweeps, not per invoice.
3. Document discipline. Contracts, invoices, PL/CI, HS codes, and shipment proofs are standardized and attached pre-payment in the bank channel to avoid “please provide docs” delays.
4. Refunds that don’t unravel deals. Partial or quality-related credits are executed as CNY returns through the same channel, with automated references back to the original pay-in.

How the escrow actually worked

For project orders, the exporter configured a rules-based escrow rather than a manual “trust me” hold:

• Deposit (30%). Buyer funds are received in CNY and visible to both parties; release to the exporter is immediate to start production.
• Shipment release (60%). Triggered by a document set: commercial invoice, packing list, bill of lading/air waybill, export declaration number, and—if required—inspection certificates. The provider validates metadata, then releases funds.
• Acceptance tail (10%). Either upon buyer acceptance (proof of delivery plus a short acceptance note) or day-count release (e.g., 10 days after confirmed delivery), whichever hits first.
• Dispute lane. If the buyer disputes, the escrow pauses the tail portion while the exporter can still draw on the released 90%; resolution follows a pre-agreed evidence checklist (photos, QC reports, serial numbers).

No letters of credit, no bespoke legal choreography—just deterministic steps encoded in the payout rules.

Data, purpose codes, and banking sanity

Chinese banks and the cross-border RMB framework expect clean, consistent data:

• Contract and invoice alignment. SKUs, quantities, unit prices, and Incoterms must match across documents; differences trigger questions.
• Purpose codes/remarks. Payment reason fields are standardized; using the correct trade purpose short-circuits many reviews.
• HS codes & logistics link. Including HS codes and shipment identifiers lets banks tie funds to actual goods flows.
• Counterparty names. Exact legal names (no trading nicknames) reduce false holds.

By front-loading this data in the payment request, the exporter cut review time from days to hours.

FX and repatriation: keep it boring, keep it measured

• CNH vs CNY. The provider settled buyer funds into an off-shore CNH balance mapped to the exporter’s name, convertible to EUR on demand; when on-shore CNY was used, conversion windows were coordinated to avoid day-end squeezes.
• Sweep rules. Convert and remit to EUR when balances exceed a defined threshold or before payroll/vendor cycles; otherwise hold CNH and let invoices accumulate.
• Benchmarking. Treasury logged achieved rates against independent benchmarks to quantify realized spread over time.
• Hedges only when needed. Given short balance duration, the exporter kept hedging light; forward coverage was reserved for large, predictable project tails.

Buyers always saw local CNY terms; the exporter optimized EUR in the background.

Risk, fraud, and operational controls

• Name-account lock. First payments from a new buyer required an account-name match; changes to beneficiary details triggered a cooling-off period and out-of-band verification.
• Dual control. Any release rule edits or beneficiary additions required two approvals.
• Refund binding. Credits returned to the original source account by default; exceptions demanded extra verification.
• Alerts. Velocity spikes (many small deposits from unrelated accounts) or unusual fragmentation tripped reviews.

These are simple controls, but on trade flows they remove most operational surprises.

Implementation in four sprints

1. Contracts & pricing. The sales playbook added CNY price lists, standard escrow language in T&Cs, and Incoterms mapping for shipment triggers.
2. Banking rails. The provider/bank issued collection account details and escrow rules; API/webhooks posted “funds received/released” events to the ERP.
3. Documents & evidence. A single upload bundle (contract, CI/PL, HS codes, shipping proofs) became part of order creation.
4. Pilot & scale. Two distributors with recurring frictions switched first; after a month of clean cycles, all China orders moved to the new model.

What changed, in measurable terms

• DSO for standard orders dropped from T+15–20 (counting wire uncertainty) to T+3–5 (order cycle, not payment). Funds often posted same day after buyer initiation.
• Under-payments from intermediary fees disappeared, boosting net realized price by 100–160 bps on average.
• Dispute resolution time fell as the escrow’s evidence checklist replaced ad-hoc email threads.
• Refund cycles shortened from 7–10 days cross-border to 1–2 business days domestically in CNY.

A side effect: sales conversion improved when RMB pricing and milestone comfort replaced the old “USD 100% upfront” stance.

Lessons the team would repeat

1. Data is the product. Purpose codes, HS codes, and aligned documents unlock banking speed.
2. Milestones beat bravado. Escrowed deposits and shipment-based releases are easier to sell than all-upfront wires.
3. Separate buyer UX from treasury. Let customers live in CNY; convert to EUR on rules you control.
4. Automate the boring parts. Webhooks and a shared document bundle keep ops out of inbox purgatory.
5. Refund discipline builds trust. Source-account refunds and day-count tails prevent one issue from derailing the relationship.