Recovering Debts from Chinese Counterparties: 3 Legal Options

Vietnam–China trade keeps deepening, and with it come cross-border bad debts: goods delivered, payment never made, the counterparty gone silent. This article maps the current legal framework for Vietnamese businesses assessing how to recover debts from Chinese counterparties. The guiding principle: prevention beats recovery — the payment terms, governing law and arbitration clause written into the contract at the outset determine most of what can be recovered later. Without good clauses, cross-border debt recovery is very costly.

The first fork: locate the debtor’s assets

Before choosing a legal tool, the first question is not “where to sue” but “where are the debtor’s assets”. If the counterparty holds assets in Vietnam (bank accounts, real estate, goods), the business can sue and enforce right in Vietnam. If the assets sit in China, a cross-border recognition and enforcement mechanism will be needed — far more complex and time-consuming. Asset tracing should start early, in parallel with the other legal steps.

Option 1 — Arbitration (recommended for new contracts)

For newly signed contracts, an arbitration agreement is the recommended route. Businesses may agree on arbitration in Vietnam or at a foreign institution (e.g. SIAC, HKIAC). Arbitration’s strength in the Vietnam–China context: an arbitral award rendered in China may be recognised and enforced in Vietnam under the 1958 New York Convention — both Vietnam and China are members — combined with Article 15 of the 1998 Vietnam–China MLA treaty (on recognition of arbitral decisions) and Article 424 of the 2015 Civil Procedure Code. Key note: the New York Convention applies only to arbitral awards, not to the recognition of court judgments.

Option 2 — Courts

Civil and commercial judgments of Chinese courts may be recognised and enforced in Vietnam under Articles 15–17 of the 1998 Vietnam–China Treaty on Mutual Legal Assistance (signed 19/10/1998, effective 25/12/1999). Conditions include: the judgment has taken legal effect; the rendering court had jurisdiction; and the application dossier meets Article 16 of the treaty. Conversely, Vietnamese court judgments may likewise be considered for recognition in China under the same treaty. Warning: a Chinese judgment does not automatically take effect in Vietnam — it must go through the recognition procedure before a Vietnamese court. Recognition practice remains difficult, so the dossier must be prepared rigorously.

Option 3 — Negotiation, mediation and payment security

For debts already incurred, negotiating a restructuring with security is often the most practical step: ask for a bank guarantee or a mortgage over the counterparty’s assets in Vietnam (if any) backing the new repayment schedule. For new contracts, shift payment risk to your side from the start: letters of credit (L/C), secured DP/DA terms, deposits, or export credit insurance. Every repayment commitment made during negotiation should be put in writing — as evidence and to avoid later disputes.

The limitation trap: do not lose the right to sue

The limitation period for contract disputes is 03 years (Article 429 of the 2015 Civil Code) — once expired, the right to sue is lost. Limitation periods for arbitration and commercial claims are set out in Article 33 of the 2010 Law on Commercial Arbitration and Articles 318–319 of the 2005 Commercial Law — businesses should check the full text of these provisions for their specific case rather than guess. Many companies negotiate at length and forget the clock — by the time they sue, it is too late.

Interim emergency measures

During dispute resolution, if the counterparty holds assets in Vietnam, the business may ask a Vietnamese court to apply interim emergency measures (such as asset seizure) under the 2015 Civil Procedure Code, to prevent asset dissipation before a final decision. Consider this tool early: a winning judgment means little if the assets have already been moved away.

Enforcement: under the 2025 Law on Civil Judgment Enforcement

From 01/7/2026, civil judgment enforcement is governed by the Law on Civil Judgment Enforcement 106/2025/QH15 (passed 05/12/2025). The 2008 Law on Civil Judgment Enforcement (26/2008) expired on the same date and may no longer be cited. The hard rule: all coercive enforcement measures may only be carried out through state judgment-enforcement agencies, after a recognised judgment or award exists. There is no such thing as cross-border private “debt collection by force” — any suggestion of extra-legal measures must be avoided absolutely.

Practical realities to anticipate

This article presents a legal framework; it does not “decide” any specific case in place of a court or tribunal. Businesses should anticipate practical barriers: the language gap, the need to retain local counsel in China, and potentially lengthy enforcement. Never promise — to yourself or to partners — that recovery is “certain” within a specific timeframe; assess the odds under each option and prepare fallback plans.