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How to Recover Money from a Chinese Company?-CTD 101 Series

Thu, 14 Apr 2022
Contributors: Meng Yu 余萌
Editor: C. J. Observer

Before bringing a lawsuit, you could first consider negotiation, complaint, and debt collection.

This post was first published in CJO GLOBAL, which is committed to providing consulting services in China-related cross-border trade risk management and debt collection.

1. Negotiation

Negotiation is the most cost-effective measure to get your money back, but the key is how to persuade the Chinese supplier to refund.

In order to succeed in a negotiation, you should gain some “bargaining chips” by legitimately inflicting losses on the supplier.

For example, if you know other customers of the supplier, you can reveal to them that the supplier is owing money to you, and then copy the relevant correspondence to the supplier. In this way, your supplier may negotiate with you to maintain his credit with other customers.

Nevertheless, you should ensure that no obligation of confidentiality to your Chinese suppliers is violated in this correspondence.

Apart from that, you can also add pressure on the supplier by making complaints.

Please keep in mind that you cannot use these tactics to claim additional benefits, otherwise, it constitutes a crime, at least under Chinese law.

2. Complaints

(1) to Chinese Embassies and Consulates

You can make complaints to the Chinese Embassy or Consulates in your country. In some cases, the embassy or consulates will refer your complaints to the law enforcement agencies and trade promotion agencies in China, who have the authority to mediate your dispute with the Chinese supplier.

(2) to Local Law Enforcement Agencies in China

You can also make complaints to the Chinese government. Under normal conditions, it makes no sense to complain to the central government and its departments, since usually these departments are only responsible for policy formulation, not law enforcement. Instead, you should turn to government departments at local levels where the Chinese supplier resides, such as the local authorities for administration for market regulation or the local commission of commerce.

With the aim of maintaining the local business environment, these local law enforcement agencies will be more than willing to help you settle the dispute. After all, export trade is a significant source of revenue for many local governments.

But, there are times when some local law enforcement agencies may ignore your complaints, especially if the dispute involves very little money. This is because many local law enforcement agencies in China only act on orders from above, rather than on their own initiative.

In any case, complaints are a relatively low-cost measure. Thus, you can give it a try, or ask your Chinese agents to do so.

(3) to Business Associations or Chambers of Commerce

If you find that the Chinese supplier has joined a business association or chamber of commerce, you can make complaints to these organizations.

The organizations they join can be local or international.

Some suppliers need to maintain their good reputation with these organizations, so they fear being tainted with scandal.

Some suppliers have spent a great deal of money to join these organizations, so they fear being removed on account of an adverse record.

3. Debt Collection

You can also entrust a debt collection agent in China to communicate with the Chinese supplier on your behalf.

These agents will adopt legitimate measures to urge the debtor to pay up.

In many cases, Chinese suppliers dare to commit any fraud or default simply because you don’t have agents in China. The long-distance and national borders make them believe that they bear no liability for fraud or default.

Once you have agents in China, these Chinese suppliers will show more restraint.

 

Photo by Zhang qc on Unsplash

Contributors: Meng Yu 余萌

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