How to Enforce Contracts in China: A Guide for Foreign Companies

A contract is only as good as your ability to enforce it. For foreign companies doing business with Chinese counterparties, understanding how to create enforceable contracts — and what to do when they're breached — is essential.

Prevention: Drafting Enforceable Contracts

The best time to think about enforcement is before you sign. Here's what makes a contract enforceable in China:

1. Use Chinese Language (or Bilingual)

Chinese courts require Chinese-language documents. While you can have a bilingual contract, specify which version controls in case of discrepancy. Many foreign companies make the mistake of using English-only contracts, which creates problems in Chinese courts.

2. Choose the Right Dispute Resolution Clause

This is perhaps the most important clause in your contract. Your options:

• Chinese court jurisdiction: Specify which court (usually defendant's location or contract performance location)
• Arbitration: CIETAC (China), HKIAC (Hong Kong), or other institutions

3. Be Specific About Terms

Vague terms lead to disputes. Clearly specify:

• Payment terms and deadlines
• Delivery requirements and acceptance criteria
• Quality standards and inspection procedures
• Consequences of breach (liquidated damages)
• Termination conditions

4. Include Proper Party Information

Verify and include the Chinese company's:

• Full legal name (in Chinese characters)
• Unified Social Credit Code (统一社会信用代码)
• Registered address
• Legal representative's name

When Breach Occurs: Your Options

Step 1: Send a Formal Demand

Before litigation, send a written demand letter. This:

• Creates a record of the breach
• May prompt settlement
• Shows the court you attempted resolution

Step 2: Evaluate Your Evidence

Chinese courts are document-focused. Gather:

• The signed contract
• All amendments and correspondence
• Proof of your performance (delivery records, etc.)
• Evidence of breach (non-payment records, defect reports)
• Damage calculations

Step 3: Choose Your Forum

Based on your contract's dispute resolution clause:

• If arbitration: File with the designated arbitration institution
• If court: File with the appropriate Chinese court
• If silent: Generally, you'll need to sue in Chinese court

Litigation in Chinese Courts

If you're going to court in China:

Document Preparation

Foreign documents must be notarized, legalized (apostille or embassy authentication), and translated into Chinese.

Timeline

Expect 6-18 months for first instance, potentially longer with appeals.

Costs

Court fees are relatively low (percentage of claim amount). Attorney fees vary but are generally lower than Western countries.

Enforcing Judgments and Awards

Chinese Court Judgments

Once you win, you can apply for enforcement. The court can:

• Freeze and seize bank accounts
• Seize and auction property
• Restrict the debtor's activities (travel bans, credit blacklisting)

Arbitration Awards

Domestic arbitration awards are enforced similarly to court judgments. Foreign arbitration awards (from HKIAC, SIAC, etc.) are enforced under the New York Convention.

Key Takeaways

1. Draft contracts with enforcement in mind from the start
2. Use Chinese language or bilingual contracts
3. Include clear, specific dispute resolution clauses
4. Verify your counterparty's information
5. Act promptly when breach occurs
6. Preserve all evidence
7. Consider arbitration for significant contracts