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If Your Chinese Debtor Repays in Non-RMB Currency, How Does Chinese Court Calculate Default Interest?-CTD 101 Series

Mon, 26 Jun 2023
Editor: C. J. Observer

When a Chinese debtor owes you money denominated in USD, EUR, JPY or other currencies, how should you ask him to pay the default interest?

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. We will explain how debt collection works in China below.

Imagine the debtor needs to refund you for your payment in dollars or compensate you for your losses in euros, but he fails to pay you when the payment deadline is due.

For the overdue payment, if you have agreed on the calculation of default interest for overdue payment in the contract, you can demand that the debtor pays default interest (interest for late payment) in accordance with the calculation method stated in the contract.

However, what if you have not agreed on the method for calculating default interest?

According to China’s judicial policy, you can calculate the default interest at the Chinese banks’ interest rate for the same type of foreign currency loan over the same period.

However, Chinese banks have a variety of loan products, and it is still uncertain which product’s default interest rate will prevail.



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Photo by Alexander Mils on Unsplash

Contributors: CJO Staff Contributors Team

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