Top-Rated Debt Collection Agency in China
Fast and reliable debt collection in China - no upfront costs, only pay for success. Request a FREE Consultation or upload your claim today.
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Recovering your debt in China is easiest this way.
Debitura is a China-centric debt recovery specialist, providing a full suite of services to manage accounts receivables, send debt collection notices, pursue pre-legal and legal debt collection, and enforce court proceedings. Our team of seasoned professionals boasts an in-depth understanding of China's debt collection laws and regulations, delivering swift and reliable solutions to retrieve unpaid debts and support your business's success.
We provide unwavering support from beginning to end.
Tailored recovery plan.
We have a team of over 500 specialists in debt collection on a global scale.
Achieving a 87% success rate with the lowest cost.
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The ultimate guide about debt collection in China
In need of debt recovery in China? You've come to the right spot! Our collection agency has assisted hundreds of businesses with financial claims in this area.
It's no doubt that collecting a debt from such a foreign land can be intimidating and difficult; however, we are knowledgeable and experienced when it comes to navigating through language barriers, regulations and laws, as well as cultural differences. With us by your side throughout this process, you can rest assured knowing your claim is being handled properly.
At Debitura, our team puts people first, doing whatever we can to help you reclaim your money while still preserving a positive relationship with the customer. We understand that reputation is key and make it our mission to protect yours through fair but firm public relations tactics! If you're interested in collecting debt on your own terms and want to fully grasp Chinese debt collection from start to finish, read this guide for more information.
Alternatively, if outsourcing the process sounds like something better suited for you; allow us at Debitura assist by connecting you with an experienced local law firm specializing in China debt recovery services.
Debitura is your one-stop shop for debt collection - no matter where in the world it needs to be done. All you have to do is upload your claim and within 24 hours, we will provide 3 free quotes from local lawyers who specialize in debt recovery. By combining a customer-focused approach with cutting edge technology solutions, Debitura delivers fast results without sacrificing important relationships with clients along the way. Get started now for worry-free debt collection! Furthermore, our renowned circle of debt collectors, attorneys, providers and traders are treasured alliances that allow us to accomplish the job. We value all these connections - however small or large they may be.
Upload claim
Begin collecting your money owed from China now without any cost. Get started by creating a profile for free and in just two minutes, upload your case.
Pre-legal
During the first 3 months, we will use our effective pre-legal recovery process to attempt to collect your claim. You only pay if we succeed.
Legal
If your claim remains unpaid after the pre-legal phase, we will offer you three quotes from our selected local debt collection attorneys.
24/7 updates
You get access to our online portal where you can track your case in real-time
Introduction to collecting debt in China
Struggling to secure the money owed by your Chinese customers? Don't fret; our service simplifies the collection of debt in China. The individual indebted is referred to as "the debtor", while you, as creditor and issuer of a debt or invoice are considered "the creditor". Self-collection of debts is known as “first-party collections”, but if outsourcing to another entity better suits your needs then “third-party collections" should be taken into consideration. So don't wait any longer - take action now with us and get paid!
- With an average of 94 days, the Chinese DSO is significantly higher than other countries and can be difficult to effectively manage. Late payments remain largely unchecked which further complicates matters.
- The court system is intricate and inefficient, marred by opacity, prolonged delays, and high expenses. Furthermore, its enforcement results are unsatisfactory; therefore amicable or non-litigation collection is the most preferred option.
- Filing for insolvency is a complex affair, and liquidation often being the go-to solution.
Days Sales Outstanding (DSO)
In China, payment terms differ from 30 days in the high-tech sector to 120 days when it comes to commodity trading. On average though, Days Sales Outstanding (DSO) is on a downward trend and has reached 94 days - significantly exceeding cultural practices that do not permit businesses taking advantage of their commitments. Interestingly enough however, DSO for listed companies have decreased over recent years.
While most overdue payments are caused by the financial woes of a debtor's customers, businesses in China often press for extended payment delays as part of their cash flow management. Needless to say, granting 120-180 days payment terms is not recommended under any circumstances.
Common payment types in China
Payment methods vary, but the most common include:
Effervescent bank transfers are the go-to method of payment due to their speed, security, and widespread utilization across both domestic and international banking networks. Especially for organizations based outside of China that export products there—transfers are safeguarded by Export Credit Insurance policies which minimize the danger posed from customer bankruptcy without warning or prior notice.
Allianz Trade’s risk specialists in China strive to ensure the financial safety of our clients’ partners, allowing them to trade and claim up specified credit limits. Credit insurance for domestic commercial activity within China is becoming more favored among Chinese businesses, which is why Allianz Trade works together with select local insurers that help clients from all around the country conduct their business safely.
Alternatively, Standby Letters of Credit can provide a sense of security to both parties since it is backed by a bank guarantee. Moreover, Documentary Letters of Credit that are irrevocable and confirmed require the debtor to ensure payment availability for the beneficiary once all terms have been met - thus serving as an effective signifier of good faith on behalf contractual obligations.
Primary Corporate Structures
What you are liable for in terms of business debts depends on the legal structure your company is registered under. Below we will outline these structures:
- Many domestic businesses are structured as a Sole Proprietorship, meaning they are owned and operated by an individual who contributes their assets to the venture. Others take shape through Joint Stock Companies which hold capital divided into negotiable shares; shareholders in this form of business cannot be held responsible for more than what is invested in the stock itself.
- Foreign investors have a variety of business structures to choose from. WFOEs are intricate, limited liability structures owned by foreign investors that enable repatriation of profits to their home countries. In 2010, FIPEs were introduced as an option for foreign investors with a reduced capital requirement for establishing businesses in China. Alternatively, Representative Offices (RO) can be used solely for the purposes of liaisoning and market research; however they may not generate any revenue whatsoever.
- Joint Ventures (JV) provide an excellent opportunity for foreign investors to enter China's restricted market by pooling resources, risks and potential profits. An Equity Joint Venture is a more formal arrangement involving the formation of an incorporated entity but there are also Contractual Joint Ventures available as well. Special Purpose Vehicles (SPV), often based in Hong Kong, can be used to facilitate investments into mainland China.
The debt collection process in China
The debt collection process in China usually happens in more than one step.
The image below explains our standard process for collecting debt in China:
1 Upload your claim:
Unless you want to get your money back yourself, you will start by finding a company that collects debt. You will give them your information so they can help you get your money back. If you use Debitura, we will give you 3 quotes from different companies in the Asia country where the person you are trying to get money from lives. This is free - no strings attached.
2 Amicable collection:
The collection process typically begins with a "campaign" of friendly reminders sent to your debtor via email, SMS, letter and all other available communication channels in the specific country. The goal is to get the debtor to pay or acknowledge the debt and start a payment plan. We offer a no-cure-no-pay solution for amicable collection, where you only pay a small success fee if we recover your debt. Amicable collections with Debitura are 100% risk-free!
3 Evaluation:
If you have not received payment from the debtor after the amicable phase, it is time to evaluate the next steps. We will look at the size of your claim, the payment probability and other factors to guide you in take the best decision on what to do next. There are three typical next steps:
A Surveillance:
If your claim is below 2.000-5000€, it might not be worth it to take more legal actions. In this case, we recommend "debt surveillance". This means that we will keep reaching out to your debtor and try to negotiate an agreement that is good for both of us.
B: Legal collections:
The steps you will have to take will depend on the type and amount of your claim. Generally speaking, it will likely take a year and a half to finish the case.
C: Debt enforcement:
If the person you are owed money from has said that they owe you money, or if there is a court order, you can go to the bailiff's court to get your money.
At Debitura, we can help you with all three steps in China.
Amicable collection in China
At Debitura, we offer a 100% risk-free and very efficient process for amicable collections. Simply submit your claim, and we will get started within 24 hours.
To ensure that your debtors are contacted promptly, we will utilize all methods of communication available in China - from email to text messaging, physical letters and phone calls to social media.
Through this method, our goal is to:
A) Secure payment of the full debt amount or
B) Acknowledge and arrange to settle the debt through an agreeable installment plan.
If your debtor has questioned the validity of your claim, it is not feasible to begin with an amicable resolution but you must instead start directly with legal collections.
Late payment interest
A late payment interest fee may be levied, contingent on the terms of your contract. This amount is derived from the People’s Bank of China loan rate: 4.35% annually (4.35%, if overdue for less than one year; and 4.75%, if delinquent more than a single year).
If a case makes its way to court, creditors/plaintiffs typically charge four times the Central Bank’s interest rate if payment is overdue and there isn't any penalty clause in the sales agreement. Interest can be used as an instrument of negotiation and tends to fade away when both parties are able to come up with a compromise that allows for debt recovery without going through legal proceedings. Nonetheless, collection costs should still be considered even if no resolution is reached.
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amicable debt collection
Upload your claim and get started with our 100% no-cure-no-pay collection solution.
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Legal collection in China
If your claim has gone unpaid during the amicable phase or if a debtor is unwilling to comply, we can provide you with three free quotes from our trusted debt collection attorneys. Our local lawyer will then reach out to the debtor and attempt negotiations for payment. Moreover, our partners have access to Chinese courts which allow them to acquire a legally binding court order that can be used in enforcement proceedings. With this payment order at hand, it's all but ensured that you'll get what rightfully belongs to you; so don't hesitate--trust us and let us give justice where it’s due!
Ordinary proceedings
If the friendly approach fails to achieve desirable results or if the defendant questions your claim, commencing legal action is an available option. In cases of undisputed debt, you can initiate a pre-court procedure (as stated in PRC Civil Procedure Law No. 214) and request for a Payment Order from the Basic People’s Court which becomes effective within 15 calendar days upon delivery to debtor should they fail to comply without presenting any defense.
If a defendant brings a counterclaim, the case must be handled through normal legal proceedings. The process begins when an accusation is filed; from there, a competent court will review the claim to determine if it should be accepted. Afterward, both parties are given an opportunity to come to terms before judgment is passed and evidence reviewed. This provides all sides with equal footing in their endeavor for justice or resolution of conflict.
Fundamentally, judicial decrees will typically include compensatory damages and directives to end any unfavorable impacts or infringements. In certain cases, the court could mandate specific execution too. Nevertheless, punitive damages are not permitted by law.
The Chinese court system is an intricate maze of judicial divisions at multiple levels. At the lowest tier, the Basic People's Courts (which include County People's Courts, Municipal People’s Courts, courts for Autonomous Counties and those in Municipal Districts) hear criminal trials as well as administrative cases and domestic disputes initially.
The Intermediate People’s Courts are responsible for handling cases that have major implications in their jurisdiction, including those related to foreign entities. Additionally, they will preside over appeals brought against decisions made by the Basic People’s Court. The Higher People's Courts at a Central Government level will make interpretations on legal matters and may also oversee certain significant trials from first instance onwards. Finally, the highest court of all – the Supreme People's Court - has authority over every type of case and its rulings carry more weight than any other adjudication body in China; it also issues judicial interpretations and monitors local courts' decisons.
To ensure you receive the best legal services at an affordable price, it's critical that you obtain and compare multiple quotes for your claim. Fortunately, Debitura makes this process easier than ever with just a few clicks! With so many attorneys to choose from offering varying levels of complexity and size for your claim, finding the right one has never been simpler or more cost-efficient.
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legal debt collection
Upload your claim and get 3 FREE quotes from our local collection partners.
Debt enforcement in China
To successfully enforce your claim in China, you have the option of using a bailiff's court if you can present an official acknowledgment from the debtor or a valid court order.
According to the law, losing parties are required to abide by a final verdict. If not, the applicant could request for enforcement at the People’s Court of first instance or any court situated in vicinity of their enforceable property. The judge can then impose asset and bank account freezing on debtors as needed. Unfortunately, enforcing civil judgments or arbitral awards is usually quite hard in practice within China's borders.
As an alternative, companies can seek judgements in the Hong Kong courts that will be legally binding under Arrangement on Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial Matters (REJA) of 2008. Fortunately, Hong Kong has a reliable judicial system independent from China's court systems, so REJA makes it possible for decisions handed out by Hong Kong Courts to be enforced across mainland China.
Hong Kong has historically been the premier jurisdiction for agreements between foreign and Chinese parties, as well as a trusted location to enforce decisions in China. Garnishee Orders can be employed within this country, and creditors should implement them quickly if debtors fail to comply with rulings. To take advantage of Hong Kong's courts, contracts must specify that any disputes will be exclusively resolved by these courts; thus it is wise to consult legal counsel first.
The details and expenses of your case are unique to you. Uploading your information to Debitura will give you three individualized quotes pertinent to your claim within a day!
Get started with
debt enforcement
Upload your claim and get 3 FREE quotes from our local collection partners.
Insolvency proceedings in China
When a debtor is unable to pay their debts, the last recourse is an insolvency procedure. This approach seeks to liquidate the debtors' assets and divide them between creditors in accordance with priority of debt owed.
- The bankruptcy law in China authorizes the debtor to seek a compromise with creditors in order to settle liabilities, which must be approved by two-thirds of unsecured creditors.
- If the court accepts a bankruptcy petition, creditors must file their claims with the court during a specific period of time, and all claims against the debtor are then temporarily suspended until an administrator takes control of the company and liquidates its assets.
- Unsecured creditors may enforce their rights as long as no insolvency proceedings have been opened, but once insolvency proceedings commence, secured creditors have priority.
- The proceeds of liquidation are used to cover bankruptcy procedural costs and debts owed to employment-related entities and fiscal entities; unsecured creditor would come last.
The analysis is concluding that the risk of doing business in China is medium-low. Based on this medium-low score, we recommend being careful providing credit and considering charging upfront payment or using credit insurance when trading if you don't know the customer in China well. If possible, provide a short credit period or even better upfront payment. The medium-low risk score is based on the following factors:
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The economic risk in China
Economic risk in China is medium (3 out of 6). An economic risk of 3 out of 6 is low in Asia.
GDP and economic growth are critical drivers for economic risk.
The GDP of China is 17734.06 bn. USD (2021), growing by 8.11% per year.
In terms of the size of its economy, China ranks #2 out of 183 countries and has a large economy.
In terms of growth rate, it is ranked #32 out of 183 countries and is therefore considered a fast-growing economy.
GDP per capita is 12556 USD, ranking China number #56 out of 183 countries. This means the purchasing power of citizens in China is high compared to the rest of the world.
You can see a more detailed picture of GDP and economic growth in China in the table below:
Another significant influencer for the economic risk score is the inflation rate and the interest rates. You can see a more detailed picture of monetary KPIs in China in the table below:
The inflation in China was 1% in 2021 which is considered a very low inflation rate.
Businesses has an interest rate which is 4.35%.
The business environment risk in China
Our analysis shows that the business environment risk in China is medium-high (4 out of 6), which is a pretty average risk score in Asia.
Economic freedom and rights determine the business environment risk in a country. You can see the critical facts for China in the table below:
As you can see in the table, the property rights index is 62 in China, which is considered quite low in Asia.
The business freedom index is based on 10 indicators, using data from the World Bank’s Doing Business study. The Index is 80 in China, a quite good score for a country in Asia.
China's overall economic freedom index is 58 out of 100 and is based on factors such as the rule of law, regulatory efficiency, and market openness.
The political risk in China
The political risk in China is low, with a score of 2/6. This is a low political risk score in Asia.
The governance and political stability indicators are important drivers for political risk. An overview of China can be seen in the graphs below:
The rule of law index analyses to which extent agents have confidence in and abide by the rules of society, in particular the quality of contract enforcement, property rights, the quality of the courts, and the police's ability to enforce court orders.
When doing business in a country, the rule of law index is critical as it describes your ability to enforce commercial contracts.
In China, the rule of law index is at 0.04 points, with the score going from -2.5 (weak) to 2.5 (strong). China has, therefore, a low rule of law index, which means it often is very difficult to enforce your contracts. We, therefore, recommend avoiding credits and recommend charging upfront payment instead.
Other drivers for the low political risks are the weak control of corruption, the very weak political stability index, and the normal shadow economy that is 12.11% of China's GDP.
The commercial risk in China
In China, the commercial risk score is 2/4, which in our model is a low score. This low commercial risk score is pretty average compared to the average in Asia.
The commercial risk is influenced by a country's international trade relationships. You can see some of the key facts for China in the table below:
China has a foreign exchange reserve of 3427.93 bn. USD.
China has a positive trade balance of 2.59% of GDP. What this means is that China imports fewer goods and services than the country exports.
The financing risk in China
We have calculated the financing risk to be 2/4, which equals a low risk. A low financing risk score is relatively low for countries in Asia.
The country's banking system, efficiency, and stability influence the financing risk. You can find the extra information for China in the table below:
In China, the credit information sharing index is 8 on a scale from 0 (low) to 8 (high). This means the accessibility and quality of credit information available in China is high.
This makes it easy for you to understand the credit risk of your counterpart in China. You should therefore be able to find a good local credit rating agency that can help you analyse the creditworthiness of your specific customers.
Your rights as a creditor are 4 out of 12 and, therefore, very weak.
The low financing risk for creditors also impacts the medium interest rate in the private sector of 4.35%.
Debt Collection in China: Frequently Asked Questions (FAQs)
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Collecting debt in China can be challenging due to long DSO, an intricate and inefficient court system, and difficult insolvency processes. Payment terms vary and bank transfers are the preferred method. Businesses in China often allow extended payment delays for cash flow management, but this is not recommended. Debt collection in China is a multi-step process that starts with amicable collection and may progress to legal collections or debt enforcement. At Debitura, we can assist with every step of the debt collection process in China.
The debt collection process in China typically involves three steps - Pre-legal collection, legal debt collection, and debt enforcement. The pre-legal collection involves friendly reminders, while legal collection takes around a year and a half to complete. Debt enforcement includes going to the bailiff's court. At Debitura, we offer support for all three steps in China.
In China, if a debt becomes disputed, a civil lawsuit may be necessary. There are legal options such as debt enforcement and insolvency proceedings. However, legal actions require a local lawyer to ensure proper representation. The judicial system is complex with many levels of courts. Obtaining multiple quotes for legal services is important to get quality legal services at an affordable price. In case of insolvency, bankruptcy law in China enables the debtor to settle liabilities with creditors, and liquidate assets to pay off debts.
At Debitura, we offer a no-cure-no-pay model for pre-legal debt collection in China. Our success fee ranges between 10-20%. The cost for legal actions varies depending on your specific case and desired actions. However, we can provide you with 3 quotes from the best debt collection lawyers in China. Contact us for more information.
The duration of debt collection in China depends on the debtor and the case. If the matter can be resolved before legal action, it may take 3-6 months. However, if legal action is necessary, the process can take 12-18 months. The length of time is determined by the complexity of the case and the willingness of the debtor to cooperate.
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