Debt Collection in China

China has a four-tier court system: the Supreme People's Court (SPC), High People's Courts, Intermediate People's Courts, and Basic People's Courts (primary level). Commercial debt cases are distributed across these tiers based on the claim amount and complexity. Specific allocation criteria vary by region.

Ordinary civil procedure. The standard route for contested commercial debt claims. The creditor files a statement of claim with the competent court, which notifies the defendant. After service, the defendant has 15 days (or longer if domiciled abroad) to file a response. The case then enters a pre-trial and trial phase. For straightforward cases at the primary court level, a single judge may preside rather than a collegial panel.

Simplified procedure. Available at the primary court level for uncomplicated cases, typically those involving smaller amounts or clear-cut facts. The court, not the parties, determines whether simplified procedure applies. This route is faster and involves fewer procedural steps.

Demand letter (lettera di diffida). While not legally mandatory, sending a formal demand letter through a Chinese attorney before filing suit is strongly recommended as a first step. An effective demand letter: (1) is drafted and sent by a Chinese lawyer, which triggers specific procedural consequences; (2) is concise and clear about the intention to file suit if payment is not received within a defined deadline; (3) includes an accurate calculation of outstanding interest; and (4) is sent only after all documents needed to file the claim are ready, so the action can be initiated immediately if the debtor does not pay. Critically, a demand letter interrupts the three-year limitation period and restarts it from the date of sending.

For the official structure of the Chinese court system, see the Supreme People's Court portal: http://english.court.gov.cn.

Timelines in Chinese litigation depend on the court level, the complexity of the case, and whether the debtor contests the claim.

• Primary court (simple procedure): typically 3–6 months.
• Primary court (ordinary procedure): typically 6–12 months.
• Intermediate court (first instance): typically 12–18 months.
• Appeal: adds 3–6 months.

One factor that can extend timelines significantly is service of process on a foreign defendant (if a counterclaim is involved) or the authentication of foreign documents. Evidence produced outside China must typically be notarised and apostilled (or legalised, for countries not party to the Hague Apostille Convention) and then officially translated into Mandarin.

Judicial mediation. Chinese civil procedure integrates mediation as a standard part of litigation. The presiding judge actively encourages the parties to settle at several stages of the proceedings. If mediation succeeds, the resulting agreement is binding and enforceable as a court-issued mediation statement (tiaojie shu). Mediation is not a separate optional process: it is embedded in the standard workflow, and foreign creditors should be prepared for it.

For case statistics and court performance data, the China Statistical Yearbook on Law (Zhongguo Falv Nianjian) is the official reference: http://www.moj.gov.cn.

Yes. Chinese courts accept cases filed by foreign creditors. However, several specific requirements and practical obstacles must be anticipated.

Local attorney required in practice. While there is no statutory obligation for a foreign creditor to retain Chinese counsel, it is effectively indispensable. Only attorneys licensed in China (and admitted to the relevant provincial bar) can represent parties before Chinese courts. All filings and arguments must be in Mandarin.

Special power of attorney. To instruct a Chinese attorney, the foreign creditor must issue a notarised special power of attorney (procura speciale). For EU and other non-Hague Convention countries with China, the document must be notarised and then legalised through the Chinese consulate or embassy. For countries that have bilateral agreements with China, simplified procedures may apply. The power of attorney must be in Chinese or bilingual, using a template provided by the attorney.

Jurisdiction. Chinese courts have jurisdiction when the defendant is domiciled in China or when the contract was signed, performed, or breached in China. For cross-border commercial contracts, jurisdiction clauses should be drafted carefully: Chinese courts will generally respect contractual choice-of-court agreements for foreign courts, but enforcement of a foreign judgment in China requires a bilateral treaty or reciprocity — which is often difficult to establish.

Court filing fees. Filing fees (an zhi anjian jiaona) are calculated on a sliding scale on the claim amount: approximately 2.5% for the first CNY 1 million, decreasing to 0.5% for the portion above CNY 10 million. They are paid by the claimant at filing and are recoverable from the losing party if the creditor prevails.

The official schedule of court fees is published by the Supreme People's Court: http://english.court.gov.cn/2015-08/17/content_21625890.htm.

If a debtor in China has no reachable assets at the time of enforcement, the creditor has limited immediate options. However, several tools are worth considering.

Asset preservation orders before filing. The most powerful tool is to apply for a precautionary asset-preservation order (cailchan baoquan) before or at the time of filing. These orders can freeze bank accounts, seal real estate, or attach other property. Requirements: the creditor must provide a guarantee to the court (in the form of cash, insurance bond, or bank guarantee) covering potential damages to the debtor if the order is wrongly granted. If the order is sought before the main action is filed, the creditor must initiate the full claim within 30 days of the order being executed, or the freeze will be lifted.

Enforcement phase. Once a judgment is obtained, the enforcement division of the court conducts active searches for the debtor's assets using official registries (bank accounts, real estate, vehicle registrations, equity interests in companies). China's social credit system for enterprises and the "dishonest debtor" blacklist (shixin beizhixing ren mingdan) create additional pressure: companies and individuals listed cannot take flights or high-speed trains, cannot register new businesses, and face other restrictions. The People's Bank of China and the China Banking and Insurance Regulatory Commission maintain interbank databases accessible to enforcement courts.

Insolvency proceedings. If the debtor is insolvent, a creditor can petition for corporate bankruptcy under the Enterprise Bankruptcy Law of China (2006). Secured creditors are paid first from the proceeds of their collateral; unsecured trade creditors rank behind tax authorities, employee wages, and social insurance contributions. For the text of the law: https://www.gov.cn/banshi/2006-08/30/content_369980.htm.

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Q: Is there a minimum claim amount required to sue in China?

A: There is no statutory minimum. However, the combination of attorney fees and court filing fees makes claims below CNY 50,000 (approximately EUR 6,500) generally uneconomical through judicial proceedings. For smaller amounts, a well-crafted demand letter sent by a Chinese attorney — which can have significant practical impact — may be a more proportionate first step.

Q: What documentation is most critical for a debt claim in China?

A: The core evidence package includes: the signed commercial contract (ideally bilingual), purchase orders and order confirmations, shipping documents and delivery receipts, commercial invoices, bank transfer records, and all written correspondence (emails, WeChat or other messaging records). Obtaining the debtor's business licence (yingye zhizhao) is also important to verify the company's legal status, registered capital, and directors. Any document produced outside China must be notarised and apostilled or legalised before submission to a Chinese court.

Q: Can I use an arbitration clause to avoid Chinese courts?

A: Yes. Commercial contracts with Chinese counterparties frequently include arbitration clauses referring disputes to CIETAC (China International Economic and Trade Arbitration Commission) or to foreign arbitral institutions such as ICC or SIAC. Arbitration awards from recognised institutions are generally enforceable in China, though enforcement practice can vary. Foreign arbitral awards are enforceable under the New York Convention, to which China acceded in 1987.

Q: Will a European court judgment be recognised in China?

A: This is one of the most challenging aspects of cross-border debt recovery with China. Chinese courts recognise foreign judgments only on the basis of a bilateral treaty or demonstrated reciprocity. China has concluded mutual recognition treaties with a limited number of countries. Most EU member states do not currently have such treaties with China, meaning that a European judgment cannot typically be directly enforced in China and fresh proceedings before a Chinese court are required.

Q: How do I calculate interest on a commercial debt owed by a Chinese company?

A: Chinese law allows creditors to claim interest on overdue payments. If the contract specifies an interest rate, that rate applies. If no rate is agreed, the court applies the Loan Prime Rate (LPR) published by the People's Bank of China. The LPR is updated monthly and is the reference rate for civil and commercial claims since August 2020, replacing the previous benchmark lending rate. Accurately calculating and including interest in the demand letter and statement of claim can be a meaningful incentive for the debtor to settle.

Q: What if the Chinese company I am trying to sue has been deregistered?

A: If the debtor company has been dissolved and deregistered, the claim must be directed to its shareholders or liquidators, who may bear liability for debts not settled during liquidation if proper liquidation procedures were not followed. This requires a separate legal analysis and, in practice, is significantly more complex than a straightforward collection action against an operating company.