Cultural Differences: Collecting Debts from Chinese Companies

A few months ago, we discussed the topic of conducting an international debt collection with a client in China. The many differences in both culture and language, as well as the incredible physical distance, make this a very tough situation where you absolutely must have some experience if you expect to be successful. We also discussed how any collection efforts conducted in China must be done only by Chinese law firms, which means that it is well worth it to hire a debt collection agency with connections on the ground in China.

While collecting from a Chinese citizen can be a very difficult task, collecting an outstanding debt from a Chinese company can be even more difficult. With the constantly increasing amount of production work that US companies are having done in China, business interactions with Chinese companies have exploded in frequency. Like any group of business transactions, some of those arrangements are bound to fall short of expectations.

If you have had a business deal with a Chinese company fall apart on your watch, you may feel that the company owes you some sort of payment or refund from your arrangement. You may even have a logical argument to defend your view, but without the knowledge of how the Chinese culture works, you will have virtually no chance of collecting what you believe you are owed.

Differences in Negotiation 

When domestic businesses have disagreements regarding debt payments, the creditor usually sends a collection letter to the debtor detailing the recent interactions between the two companies and stating their case regarding the amount owed. This collection letter is usually rather long, and it might also contain information on how the creditor plans to proceed if the debtor fails to make a payment.

When dealing with Chinese companies, this type of explanation is simply not needed. Some of the most effective collection letters for Chinese companies simply document the amount owed and a brief threat about what will happen if rapid payment is not made.

Differences in Settlement 

The reason that domestic letters are much longer is that they are expected to either start negotiations on a settlement, or to be used as evidence in court. Domestic debtors typically respond to collection letters with excuses and promises to make payment soon.

Chinese companies, on the other hand, are notorious for refusing to settle at any cost. There are generally not interested in establishing any type of win-win scenario, because they are well aware of how difficult it will be for you to force them to pay you. They are really good at calling your bluff.

These types of differences in culture are the reason that it is absolutely necessary to have an agency that has experience with international collection procedures in your corner before you attempt to convince a Chinese company to pay you whatever amount they might owe.

Having someone on your side that knows all of the local culture and regulations of the region where your debtor is located can be an invaluable asset if your relationship with an international company suddenly goes sour.

By |2017-09-16T12:25:14+00:00September 1st, 2014|Blog|0 Comments

About the Author:

Graduated from University of Utah - business degree 1990. Served in US Army as an interrogator / linguist, then as a tactical intelligence officer - Military Intelligence 1986-1990. Managed Western US sales operations for NY based collection agency 1990-1992. Founded Direct Recovery Associates, Inc. 1992-present