If you owe money to a Chinese company for product and you cannot pay all of your creditors, skip out on the Chinese company. Near as I can tell, there is nearly a 100% chance they will never sue you to recover.
I am NOT advocating not paying your debt, but I am saying that if you have to choose among your creditors on who to pay, the Chinese company should be your choice. I am saying this based on the following:
1. About a year ago, a client had come to me for a consultation regarding a dispute it was having with its Chinese OEM supplier. The Chinese company was threatening to sue my client for about $350,000, per its invoices. My client was refusing to pay the Chinese company due to a spate of bad product. My client was seeking a $150,000 credit for the bad product and the Chinese company was refusing and threatening to sue. I advised my client not to pay anything, based on two legal maxims. One, possession is nine-tenths of the law, and two, never fund someone who is threatening to sue you.
So I met with this US client last week on something completely unrelated and I asked him “whatever happened with that Chinese supplier that had been threatening to sue you?” His response was that absolutely nothing has changed. Every few weeks, the Chinese company emails seeking its $350,000 and threatening to sue. My client responds by offering $200,000 in full settlement and the Chinese company refuses. We laughed and moved on.
2. Many years ago, my firm was retained by a Chinese company to collect on approximately $500,000 owed the Chinese company by a US company. My firm mapped out our litigation strategy, which involved suing an Alabama based company in Washington Federal Court. We spent an inordinately long time discussing with the client the costs involved in such litigation and the strategies we would employ. The Chinese company hired us and sent us a decent sized retainer.
We emailed the Chinese company to say the retainer had arrived and they emailed me back with a laundry list of things we should do on the case. Nothing on that list corresponded to what we had told them we needed to do and one of the things on the list was flat out ridiculous. We had a few weeks earlier told the Alabama company that if they did not pay by such and such a date, we would sue them. Amazingly enough, item #1 on the list from the Chinese client was that I fly down to Alabama to try to talk settlement. We wrote the Chinese company and explained that they had hired us because we were US attorneys and, as such, we know what we are doing in terms of dealing with US companies on what had now essentially become a US case. We told the Chinese company that the absolute worst thing we could do would be to fly to Alabama to talk settlement and that doing so would be tantamount to our saying that we were not really serious about suing. The Chinese company then confessed that they were not really serious about suing and that they just wanted us to settle the case. I then gave them the maxim about how you have to be prepared to try a case to settle a case and they told me they had decided not to go forward with the matter and asked us to return the retainer, which we did.
I emailed them the other day just out of curiosity to ask how their case was going and they asked us to take their case on again. We vehemently declined and noted how they needed to retain an attorney immediately because they were now facing serious potential statute of limitation problems.
3. We were once contacted by a Chinese company owed around $300,000 by an American company. We asked him all sorts of questions about the debt and he gave good answers so we asked him to send us the documents. Turns out his debt was about ten years old and way past the time we could sue. We asked him why they had waited so long and the explanation was that they had been trying to work it out. I am not kidding.
My firm has been handling cases like these for Korean and Japanese and Russian and German and companies from other countries for years. China is different. Sorry.
This is not to say, however, that foreign companies that do not pay may not face repercussions other than a law suit. For example, if you are a foreign company with a real presence in China, not paying a Chinese company might end up causing you real problems in China and you must consider this before choosing not to pay. Just by way of example, we represent a large Chinese manufacturer in an industry where there are only around five companies capable of manufacturing this particular product. Our Chinese client is owed millions by a US company and that US company figured it would not need to pay. What this US company did not figure was that our client would alert the other manufacturers of the non-payment and now none of those manufacturers will make product for this US company either. Once the US company started running out of product, it started paying our client again. On the other hand, if you have but a small presence in China and you can switch your manufacturing over to some other country….
What are you seeing out there?

Dan Harris

I am a founder of Harris Bricken, an international law firm with lawyers in Los Angeles, Portland, San Francisco, Seattle, China and Spain.

I mostly represent companies doing business in emerging market countries. It has taken me many years to build my network and it takes constant communication and travel to maintain it. My work has been as varied as securing the release of two improperly held helicopters in Papua New Guinea, setting up a legal framework to move slag from Canada to Poland’s interior, overseeing hundreds of litigation and arbitration matters in Korea, helping someone avoid terrorism charges in Japan, and seizing fish product in China to collect on a debt.

I was named as one of only three Washington State Amazing Lawyers in International Law, I am AV rated by Martindale-Hubbell Law Directory (its highest rating), I am rated 10.0 by AVVO.com (its highest rating), and I am a SuperLawyer.

I am a frequent writer and public speaker on doing business in Asia and I constantly travel between the United States and Asia. I most commonly speak on China law issues and I am the lead writer of the award winning China Law Blog (www.chinalawblog.com). Forbes Magazine, Fortune Magazine, the Wall Street Journal, Investors Business Daily, Business Week, The National Law Journal, The Washington Post, The ABA Journal, The Economist, Newsweek, NPR, The New York Times and Inside Counsel have all interviewed me regarding various aspects of my international law practice.

I am licensed in Washington, Illinois, and Alaska.

In tandem with the international law team at my firm, I focus on setting up/registering companies overseas (via WFOEs, Rep Offices or Joint Ventures), drafting international contracts (NDAs, OEM Agreements, licensing, distribution, etc.), protecting IP (trademarks, trade secrets, copyrights and patents), and overseeing M&A transactions.