China debt collection that gets results, fast.
Our “People-First” approach can help you recover more funds, in less time, anywhere in the world. Whether your claim is large or small, consumer or commercial, new or old, we can help.
Find out why Fortune 50 companies are choosing Cedar Financial as their International Debt Collection partner. Get an instant quote today.
Top Obstacles to Successful Debt Collection in China
Only Licensed Local Representatives Allowed
When attempting to collect a debt in China, one of the strangest obstacles you may face is that, according to Chinese law, debt collection doesn’t officially exist. It was prohibited in China in the 19th century, and this law is still in place today.
But while collectors and agencies may be banned, there are specific legal entities authorized to provide debt collection as a service. These include Chinese legal firms offering Risk Management or Credit Consulting services;, police; and the courts.
Because of the limits on who can collect a debt in China, it is particularly important to have connections to a legal office near your debtor. Cedar Financial has authorized local offices in China able to operate on your behalf to recover your funds. Contact us today to learn how we can help.
Vast Distances Hinder Recovery
Face-to-face can be the most effective method of debt recovery; however, finding your debtor may pose a challenge in China.
Spanning 9,600,000 square kilometers (3,706,580 square miles), with the largest population in the world at over 1.37 billion people, China’s size can make traveling to collect a debt expensive and difficult. It can take days to traverse the country to the debtor’s known address, only to find that the debtor has closed shop or moved away.
With Cedar Financial, you get access to a network of trusted Chinese local offices familiar with the region where your debtor is located. Can’t find your debtor? We go on the ground with investigative field services for the best chance of contact.
Diverse Language Barriers
While most international businesses expect to bring a translator with them to a foreign country, this still may not be enough in China.
While Chinese – Mandarin, specifically – is the most widely spoken native language in the world, it can be divided into up to 10 language groups, each with its own sub-dialects. This “translates” to hundreds of local languages which may not be mutually understandable.
Our local representatives know the local dialects, so you don’t need to deal with translation issues in communicating with your debtors.
Extensive Documentation Required
Compared to other countries, China requires an extensive list of documents as evidence in order to recover a debt. Expect to provide terms and conditions, orders, delivery notes, statements and invoices.
Having written proof prepared in advance is especially important for litigation. This is because Chinese courts prohibit nearly all discovery, and rulings are based on documents, not testimony.
Cedar Financial can help you determine what is needed to support the full recovery of your funds in collections or litigation.
Litigation in China
A US company suing a Chinese company must comply with the Hague Convention on Service Abroad. Service is done through the Chinese Central Authority in Beijing, the Bureau of International Judicial Assistance, Ministry of Justice.
Main Legal Challenges Faced:
Slow Process. It can take 12-16 months for the Ministry of Justice to send the service of process to the appropriate local people’s court to effect service. Frequent calls and emails to the Ministry and the court can expedite the process. China does not allow service by mail.
Depositions Prohibited. China’s courts favor documentary evidence over testimony, and do not allow depositions, even over the phone. To depose a witness, you must have them travel to Hong Kong or the US, otherwise, you may be arrested.
Limited Document Discovery. While some document discovery is allowed for trial purposes (not for information gathering), these requests are rarely successful. It can take over a year to get a response, and even then, there may be no clear indication that the request will be granted. In addition, Chinese companies are not familiar with US discovery and consider compliance to be optional.
Settlement Is Rare, Bankruptcy Is Dishonorable. Chinese businesses value honor and trust. This cultural attitude, combined with a much lower cost of litigation, results in a reluctance to settle or file for bankruptcy, as this would cause them to “lose face” by admitting fault.
Ability to Collect on Judgment Not Always Reliable. Chinese judgment can lack authority and often fail to get support from local law enforcement. In addition, Chinese companies may close and open under a different name to avoid judgment.
US Judgments Are Not Enforced. Unless the debtor has assets in a country that enforces judgments, it may be a waste of time to litigate in a US court, as China does not uphold US judgments.
Advantages to Suing a Chinese Company in a US Court
Because Chinese companies may not be familiar with US laws, there may be advantages for US companies litigating against Chinese companies, if there are assets available outside of China:
- American jurors tend to view Chinese companies in a negative light.
- Non-compliance with US discovery rules may hurt Chinese companies, if brought to the attention of the court.
- Chinese companies may not seriously defend their case until it is time to appeal. In China, if the trial court judge does not take your side, you can appeal at the appellate level, and this is often where the main battle is fought. Whereas in the US, you rarely get a second chance to defend your case, since US appeals courts tend to take the trial court’s decision as fact.
Need litigation in China? No need to hire anyone else.
Cedar Financial offers low-cost legal options and top Chinese creditor’s rights attorneys. We’ll advance your claim in court every step of the way, from filing to post-judgment enforcement.
Quick Facts About Debt Collection in China
Open Invoices
| Unpaid Invoice Interest Rate | Standard is the interest rate published by the People’s Bank of China. |
| Can Collection Fees be added? | Can legally add collections fees, but Chinese debtors do not expect to pay them. |
| Statute of Limitations/Prescription | Four years for contract for international sale of goods/technology import/export. Three years for civil cases |
Quick Facts About Litigation in China
Judgment
| Post Judgment Interest Rate | Interest rate may not exceed four times the legal interest rate. |
| Judgment Expiration | May be set in judgment or not – time limit for application for enforcement is two years from expiration of judgment or the effective date of the judgment, if no expiration. |
| Can judgment be renewed? | Yes |
Local Experts in Collections
We offer on-the-ground representatives in China who understand the processes and debt collection practices that work to support full recovery of your funds.
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FAQs About Debt Collection in China
We have 35 branches in major cities of China and hundreds of offices in smaller cities, which enables us to provide on-site visits to debtors no matter where they are located.
We work on a “No Collection – No Fee” basis so we will not charge a fee unless we recover your money. That principle applies to pre-legal debt collection only. If legal action is recommended/unavoidable, then we will quote our legal fees separately.
We have no minimum value or volume that is required to place accounts.
We service consumer and commercial debts in a wide range of industries, including education, government, healthcare, commercial and retail
Normal debt collection proceedings can take up to one year.
We start with an initial investigation into the debtor’s registration and credit information. Phone calls, demand letters, emails, and sometimes faxes are then sent out. If the debt is disputed, we request proof from the debtor to send to our client. If the debtor cannot be contacted, our Tracing Center will carry out the address and phone search. We also request a face-to-face meeting if necessary. If all efforts do not lead to payment, we suggest a legal filing.
The statute of limitations for a dispute from a contract for the international sale of goods or a technology import/export contract is four years. The statute of limitations for civil cases is three years, as of October 2017.
Yes, we provide on-the-ground representatives to visit your debtor in person for trace and, contact evasive debtors, and investigate assets for potential legal action.
Yes, of course. We need all the relevant documents about the case, which includes the invoices, debtor’s information and other supporting docs.
Yes. If we exhaust all our efforts and the documents are complete, we shall suggest legal action, where appropriate. We will evaluate the account and conduct an in-depth asset search before recommending the best course of action.
Collection fees are not allowed in China
* The information provided on this website does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only. Information on this website may not constitute the most up-to-date legal or other information.
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Leader in Domestic & International Debt Recovery
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