A Trusted Recovery Solution in China
Collecting a debt in China can seem impossible. Language and cultural barriers, foreign laws and customs, and sheer distance all impose serious challenges.
Debt recovery is simpler when you use a collection agency fluent in the laws and customs of the country where the debtor resides. Cedar Financial offers on-the-ground representatives in China who understand the debt collection practices that work to support full recovery of your funds.
Since 1991, Cedar Financial has served as a trustworthy, nationally licensed debt collection agency, helping businesses collect unpaid accounts internationally. With knowledge of collecting debts in a wide range of different industries, our experienced team collects your debts quickly and effectively so you can receive the payments you’re owed.
With offices in over 150 countries, including China, working with Cedar Financial provides you access to a global network of nationally licensed debt collectors. Our in-depth understanding of local laws, customs and cultures guarantees the best possible debt mediation results.
Comprehensive, People-First Help
At Cedar Financial, we put people first, doing everything we can to get your money back while still preserving a good relationship with your customer. Our strategic customer relations efforts are fair, but firm – ensuring that your reputation is our top priority.
We combine a people-oriented approach with the latest tech-driven solutions to drive results and provide better contact management. This comprehensive method gets the results you need while preserving customer relationships.
Our valuable network of collectors, attorneys, suppliers, and vendors allow us to get the job done. We cherish our relationships, no matter how small or large.
Contact us today and learn what we can do for your business.
Navigating Debt Collection in China
Collecting a debt in China can seem like a daunting task. Language and cultural barriers, foreign laws, and customs, all impose serious challenges to collecting debt. Here is some valuable information that may help you navigate the unique challenges faced in Chinese collections.
Main Challenges for Amicable Chinese Collections
Debt Collection doesn’t exist in China
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. Debt collection was prohibited in China in the 19th century, and this law is still in place today. So how can you collect a debt, if debt collection isn’t allowed?
While collectors and agencies may be banned, there are specific legal entities that are authorized to provide debt collections as a service. These include Chinese legal firms, police and the courts. Rather than presenting themselves as debt collectors, these specialized legal firms may describe their service as “Risk Management” or “Credit Consulting.”
Because of the limits on who can collect a debt, it is particularly important to have connections to a legal office near your debtor. Not only will a local firm be familiar with the laws, customs, and languages of the area, but, because of China’s law, you may not have another choice.
Face-to-face can be the most effective way to resolve an unpaid debt; however, finding your debtor may pose a challenge in China.
Spanning 9,600,000 square kilometers (3,706,580 square miles), with a population of over 1.37 billion people, China’s size can make traveling to collect a debt 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.
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 up to 10 language groups, each of which has its own sub-dialects.
So, while people may be speaking “Chinese,” there are hundreds of local languages which may not be mutually understandable. Even if you speak Mandarin, you may find yourself in a region of China where nobody can understand you, and vice versa, because they speak a different dialect.
Documentary Evidence Required
Compared to other countries, China requires an extensive list of documents as evidence in order to collect on a debt. Expect to provide such documents as terms & 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.
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 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 the 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 Judgements Not Always Reliable. Chinese judgements 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 judgement.
- US Judgements Are Not Enforced. Unless the debtor has assets in a country that enforces judgements, it may be a waste of time to litigate in a US court, as China does not uphold US judgements.
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.
Local Experts in Collections
Collections in China can be complicated for small to medium-sized businesses. When in doubt, remember that debt recovery is much simpler when you use a collection agency with local offices licensed and fluent in the laws and customs of the country where the debtor resides.
Cedar Financial offers on-the-ground representatives in China who understand the processes and debt collection practices that work to support the full recovery of your funds. For more information on how we can help, contact us today.
* 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.