China Debt Recovery for Foreign Companies

Reconcile the balance before making a demand

List the relevant contracts and invoices with amounts, currencies, due dates and payments received. Include returns, rebates, credits and disputed adjustments. Match the ledger to supporting records and explain any difference between your accounts and the debtor’s. A demand based on an unreconciled total gives the debtor an avoidable opportunity to challenge the whole calculation.

If several orders are involved, separate them. Identify which balances are admitted, disputed or not yet due. Keep the last account statement sent to the customer and its response. A later statement acknowledging a specific amount may be more useful than a general email promising to ‘sort out all payments’.

Verify the debtor and any separate security

Confirm the Chinese registered name and company identifiers against the contract, purchase order and receipt records. The party receiving goods, the invoice addressee and the purchaser may differ. Explain any assignment, agency or group-company arrangement. Do not assume that a parent company or shareholder is responsible solely because it controls the debtor.

If a guarantee or other security was agreed, obtain the complete document, execution records and relevant conditions. It may create a separate route, but the scope and enforceability need review. Record any release, variation or later payment plan that could affect it. A verbal statement that the group ‘stands behind the debt’ is not a substitute for the documents.

Prove performance and the payment due date

For goods, match delivery, acceptance and invoicing records to the debt. For services, retain scope, completion records and the customer’s approval or complaints. Identify whether payment depended on an inspection, milestone or particular document. A debtor may withhold payment because it says a condition was not met; that issue must be assessed rather than ignored.

The Civil Code addresses unpaid monetary obligations and contractual remedies. The specific claim still depends on the agreement and proof. Check interest, penalties or other additions separately and do not simply add an arbitrary collection charge. Explain how each requested amount is calculated and why you consider it payable.

• Source: PRC Civil Code — contract obligations, remedies and limitation rules

Prepare the commercial debt file

Provide an indexed file with a short explanation of the trading relationship. Keep original versions of acknowledgments and payment proposals, including the sender’s identity. If the debtor disputes quality or delivery, include those communications and your response. Omitting them from the assessment does not prevent the debtor from raising them later.

• Sales or service agreement, credit terms, accepted orders and dispute clause.
• Invoices, delivery records, acceptance documents or service-completion evidence.
• Bank statements or transfer records showing payments, credits and the outstanding balance.
• Debtor acknowledgments, account reconciliations, repayment promises and relevant chat or email records.
• Company registration identifiers, business addresses and documents for any guarantee or security.
• A chronology of due dates, demands, part-payments and any earlier proceedings.

Use a focused written demand

A demand should identify the creditor, debtor, agreement, outstanding principal and supporting calculation. Explain when payment became due and provide a clear response date and contact. Distinguish a factual payment request from a settlement offer. Keep proof of delivery and the reply, including any admission, dispute or request for time.

Do not assume a demand letter guarantees payment or protects every legal deadline. Have the dates and appropriate delivery method checked. If the debtor responds with a quality complaint, assess the evidence rather than continuing to send the same demand. The next decision may be negotiation, clarification of a dispute or preparation for proceedings.

Evaluate a repayment plan against default risk

A payment schedule can make sense if the debtor acknowledges the balance, remains active and can perform a credible plan. Specify the amount, instalment dates, payment method and consequences of a missed payment. Identify the authorized signatory and whether any security is available. Avoid a plan that merely extends time without addressing the reason payment has not occurred.

Check how the settlement affects the original claim and any existing guarantee. Agree when a release takes effect and how part-payments are allocated. If the debtor offers goods or services instead of cash, assess their practical value and new obligations. A signed arrangement is useful only if its terms and performance address the collection risk.

Assess recoverable assets and financial warning signs

Tell counsel about lawful information suggesting business closure, existing enforcement, asset transfers or inability to pay. Distinguish a verifiable record from a rumour. Public company information can assist verification, but a registration record does not establish funds available for collection. Ask which further checks are proportionate to the claim amount.

If preservation is relevant, discuss the basis, identifiable assets, procedural route and potential security. It is not the same as obtaining a final payment order. If insolvency proceedings may be involved, individual recovery may face additional issues and deadlines. Do not continue treating the matter as an ordinary payment reminder without checking that change in circumstances.

Compare arbitration, litigation and enforcement

Review the dispute clause and competent forum before filing. The revised Arbitration Law, effective March 2026, and applicable institutional rules matter where arbitration is agreed. A disputed commercial account does not automatically qualify for a simplified payment procedure. Counsel should assess the claim and the available process rather than promise a shortcut.

A court judgment or arbitral award can require a separate enforcement stage if payment is not voluntary. Foreign decisions may require recognition before mainland enforcement. Include the likely work, translation, fees and asset position in the comparison with settlement. The Civil Procedure Law provides the relevant framework for civil proceedings and enforcement.

• Source: PRC Arbitration Law — revised law effective 1 March 2026
• Source: PRC Civil Procedure Law (2023 amendment) — foreign parties, jurisdiction and proceedings

Make a staged collection decision

Agree who inside your company can authorize a discount, payment plan or proceedings. Set the commercial objective and consider the net recovery after likely costs. A strong small debt may justify a focused demand, while a contested large balance may need technical evidence and a different engagement. Do not treat a lawyer’s first letter as the full litigation budget.

Avoid inconsistent account statements, unrecorded settlement concessions and assumptions that the shareholder will pay. Preserve the entire trading history relevant to the balance. HAIYU’s China-side assessment can review debtor identity, supporting documents and legal options, then discuss the scope and fees for the next stage. No recovery percentage or collection result is guaranteed.