Debt Collection Agency in China: No Win, No Fee

Step 1 - How does amicable (pre-legal) debt collection work in China?

Pre-legal collection recovers an unpaid invoice without a lawsuit, through a formal demand and negotiation. China has no statutory pre-action dunning regime and no law requires a formal notice before suing, so the amicable phase is a commercial process aimed at full payment or a written acknowledgement of the debt. A written acknowledgement also restarts the limitation period under Civil Code article 195, which is why it is worth securing even when payment is deferred.

How our partner runs the amicable phase in China

Ningbo Esteem's lawyer team first checks a company debtor in the public company register, usually in about half an hour, or traces an individual through the address registered to the citizen ID, which takes half a day to a day. Under Chinese lawyers' practice rules the first official step is a written demand letter on law-firm letterhead rather than a phone call; follow-ups by email, SMS or further letters get firmer over two to three weeks and end with a final warning. If the debtor engages, negotiation moves to WeChat so everything is on record, calls happen only with the debtor's consent, and you approve every settlement. Settlement agreements usually include a CIETAC arbitration clause, so a debtor who breaches one also owes your legal fees. Claims below USD 5,000 get the basic steps only: a demand letter and one follow-up call. Amicable collection usually takes one to four months, often one to two.

Conduct rules in the amicable phase in China

Debt-collection companies are banned in mainland China under a 2000 joint notice, which is why recovery is run by licensed lawyers. The conduct boundary is criminal rather than administrative: Criminal Law Amendment (XI), in force 1 March 2021, makes it an offence to collect unlawful debt by threats, stalking or harassment, with up to three years' imprisonment where the circumstances are serious. A demand-letter process run through a law firm keeps the pressure lawful and preserves the evidence you need if the claim escalates.

When to escalate to court in China

Escalate when the demand lapses, the debtor disputes without substance, or the limitation period approaches. A court win is not the same as payment: if the debtor has no assets or goes bankrupt the judgment can be worth little, which is why a negotiated settlement is often the best outcome.

Step 2 - How do you obtain an enforceable title in China?

To enforce a debt through the courts you need an enforceable outcome: a court judgment, an arbitral award or, for clear undisputed claims, a payment order.

The order-for-payment procedure (zhifu ling)

The creditor applies to the basic people's court with jurisdiction, provided the money claim is clear, there is no other debt dispute between the parties, and the order can be served on the debtor in mainland China. The court tells the creditor within five days whether it accepts the application; if it does and the rights and obligations are clear and lawful, it issues the order within fifteen days. The debtor then has fifteen days from receipt to pay or file a written objection. If the debtor does neither, the creditor may apply for enforcement. There is no monetary threshold for this route. A valid written objection ends the procedure; an objection that only pleads inability to pay or asks for more time does not. Because a single objection is enough and cross-border applications are hard to bring, our partner's lawyers rarely use this route.

Ordinary actions, arbitration and small claims

After an objection, or for any disputed claim, the creditor brings an ordinary action, heard at first instance with one right of appeal. Where the contract has a written arbitration clause, the claim goes to arbitration instead: one hearing, no appeal on the merits, and a court can set an award aside only for serious procedural defects. The ordinary Summary Procedure, for simple facts and clear rights before a single judge, concludes within three months, extendable by one. The Small Claim Procedure, for claims below 50% of the relevant province's average annual employee salary and decided at a single, final instance within two months, was formalised by the 24 December 2021 amendment to the Civil Procedure Law; it excludes foreign-related cases (article 166), so a foreign creditor cannot use it.

Determining the appropriate court in China

Jurisdiction generally follows the defendant's domicile or the place of performance, subject to any valid jurisdiction or arbitration agreement. The claim must be brought within the limitation period: three years, or four years for an international sale-of-goods or technology import or export contract (Civil Code article 594).

More on court proceedings in China

The two-instance system

China operates a two-instance system: a first-instance judgment can be appealed once to the next court up, and the second-instance judgment is final and enforceable. A party can still apply for a retrial at a higher court, which reviews only whether there was an error. The Small Claim Procedure is the exception, since it is decided at a single, final instance.

Citing Civil Procedure Law article numbers

The Supreme People's Court's official English text of the Civil Procedure Law has not been updated past an earlier article-numbering scheme, and the consolidated current English text is not freely published. The procedures set out above are stable current law; where an exact current article number matters for a filing, confirm it with your local counsel rather than relying on an English translation online.

Step 3 - How does debt enforcement work in China?

Enforcement is carried out by the people's courts once you hold an enforceable outcome. The court applies the measures that match the debtor's known assets, and the creditor does not deal with private bailiffs.

Ways to enforce a claim in China

• Bank deposits: the court can inquire into, freeze and transfer the debtor's bank deposits, within the scope of the obligation.
• Income: the court can withhold or withdraw part of the debtor's income, leaving the necessary living expenses.
• Property: the court can seal up, distrain, freeze, auction or sell off the debtor's property, leaving the necessities of life.
• Statutory penalty interest: a debtor who has not paid by the deadline set in the judgment owes double interest on the delayed debt.
• Pressure tools: the courts run a public Dishonest Judgment Debtor list under Supreme People's Court provisions of 1 July 2013 (amended 2017), published through the China Enforcement Information Online portal. Listing carries travel and high-consumption restrictions and adverse credit reporting, and it is often what moves a solvent but unwilling debtor to pay.

The enforcement process in China

The creditor applies to the court with the enforceable outcome, the court investigates and attaches assets, and proceeds are applied to principal, interest and costs, with any surplus returned to the debtor. Because enforcement runs entirely through the court, asset tracing and the choice of measure are decisions the court takes on the creditor's application, so a well-evidenced application naming known bank relationships or assets moves faster.

Cross-border debt collection in China

A foreign court judgment is recognised and enforced in China on the basis of a treaty or the principle of reciprocity under the Civil Procedure Law, and the 2023 amendment, in force since 1 January 2024, substantially rewrote the foreign-related civil litigation chapter, including the jurisdiction and recognition rules for foreign judgments. US judgments have been recognised on reciprocity since 2017 (Liu Li v Tao Li, Wuhan Intermediate People's Court), and the Supreme People's Court's 2021 conference summary on foreign-related commercial trials widened the reciprocity test; that guidance does not cover IP judgments. Recognition is a separate court case, and enforcement follows only once the judgment is recognised. China signed the Hague Choice of Court Agreements Convention (2005) on 12 September 2017 but has not ratified it, so it does not yet provide a route. Foreign arbitral awards are generally easier to enforce than foreign court judgments, because the New York Convention (1958) has been in force for China since 1987, subject to the standard reciprocity and commercial reservations. For a cross-border supply contract with a Chinese counterparty, a well-drafted arbitration clause is therefore often the stronger enforcement position.