Meta Description: A practical guide for foreign creditors on recovering debts from Chinese companies through Chinese courts, including asset preservation and enforcement strategies.
For foreign creditors, the real concern is not whether a lawsuit can be filed, but whether money can actually be recovered.
This article explains how debt recovery through Chinese courts works—and where most foreign plaintiffs go wrong.
1. Litigation vs. Recovery: Not the Same Thing
Filing a lawsuit is only the first step. Recovery depends on:
- Whether the defendant has identifiable assets
- Whether assets are preserved in time
- The effectiveness of enforcement measures
Many foreign plaintiffs obtain favorable judgments but fail at the enforcement stage.
2. Pre-Trial Asset Preservation: A Critical Tool
Chinese law allows plaintiffs to apply for asset preservation before or during litigation.
This may include:
- Freezing bank accounts
- Seizing equity interests
- Restricting disposal of real estate
Timing is crucial. Once assets are moved, enforcement becomes significantly harder.
3. Common Defendant Tactics
In practice, Chinese defendants may:
- Transfer funds immediately after receiving notice
- Use affiliated entities to shield assets
- Stop operating the original company
Understanding these patterns allows plaintiffs to act proactively.
4. Enforcement After Judgment
If a defendant does not voluntarily comply with a judgment, enforcement proceedings can be initiated.
Chinese courts have authority to:
- Freeze and deduct funds
- Auction property
- Impose consumption restrictions on individuals
However, enforcement efficiency varies and requires active management.
5. Realistic Expectations
Debt recovery in China is possible, but it is not automatic.
Foreign plaintiffs should evaluate:
- Cost-benefit ratio
- Asset visibility
- Defendant’s actual solvency
A strategy focused on recovery—not just litigation—is essential.
Call to Action:
If you are considering legal action against a Chinese company or individual, early legal assessment can significantly affect the outcome.