Why Long-Term China Partners Still Fail You

If you have been working with a Chinese company for years and think you know each other well, can you let your guard down?

One of our clients based in Hungary purchased fiber cleavers from a company in Hunan province, China, with whom they had worked for eight years and has completed dozens of orders.

In the last trade contract, the two parties agreed on the document against payment at sight. However, shortly after the contract was signed, the Chinese company asked our client to pay 20% upfront, and the second payment, the remaining 80% of the total price, would be paid three months later.

But after our client paid the advance charge, the Chinese company never delivered the goods.

Subsequently, our client learned from his business partners that the Chinese company had gone bankrupt. Hence, he asked us to collect debts from the Chinese company, including filing bankruptcy claims.

Our investigation revealed that the Chinese company was not insolvent. However, given that it is currently involved in three enforcement proceedings, this company is unlikely to be able to perform the contract.

At this point, the time for payment of the remaining 80% of the total price was approaching. So we immediately informed our client to stop this payment and to negotiate with the Chinese company for the contract rescission and the refund of the advance payment.

After several communications, we finally helped the client to obtain a refund.

Since our client has cooperated with the Chinese company for eight years, he let his guard down and did not investigate the operational status of this Chinese company in time. As a result, our client almost paid when this company could not perform the contract.

Therefore, you need to keep an eye on the operational status of Chinese companies.