Debt Collection in China

This is a way to prevent the shareholders who actually control the company no longer from getting the company profits only while avoiding the company’s debts.

Debt collection in China refers to the pursuit of payables from business partners based in China.

If I pay a Chinese supplier from my bank account A, can I ask the Chinese company to pay to my bank account B when it refunds me?

Yes. If you send a demand letter to your Chinese debtor, you can improve the success rate of debt collection, although it is not guaranteed every time.

One way is to start by suing an individual guarantor (who is normally the de facto controller of the debtor).

Payment from a debtor in China is usually made by telegraphic transfer (T/T).

It is intended to prevent the company’s shareholders from escaping liabilities by hiding under the corporate veil of limited liability.

Getting refund is no different from collecting other debts.

You’d better preserve the debtor’s property through the court to prevent the debtor from evading debt by transferring assets.

Given the large scale of China’s trade, even the chance of getting bad debts is small, the impact on international creditors and amount of liabilities arising therefrom should not be underestimated.

It is not easy to demand payment from the debtor, either to ask the buyer to pay for the goods or to ask the supplier to return the money (in case of a failed transaction).

In practice, as an agency specializing in China-related debt collection, we have noticed that small and medium-sized enterprises (SMEs) are often more likely to get into situations where they are owed money by their Chinese partners.