What to Do When a Chinese Supplier Breaches Your Contract

Last updated: 2026-08-20

A Chinese supplier that fails to deliver, ships defective goods, or simply stops responding can put your whole business at risk. The good news is that a contract breach by a Chinese company is often recoverable — if you act quickly and in the right order.

This guide outlines the practical steps an overseas buyer should take.

1. Assess your position before you react

Before firing off an angry email, confirm the legal basis of your claim. Check the contract for:

• Governing law — which country's law applies if there is a dispute.
• Dispute resolution clause — whether the contract provides for court litigation, arbitration, or mediation, and in which jurisdiction.
• Delivery and inspection terms — deadlines, Incoterms, and inspection windows that affect whether you were entitled to reject the goods.
• Limitation of liability — caps on damages that may limit your recovery.

If you do not have a written contract, your rights will be determined by the applicable law — often the UN Convention on Contracts for the International Sale of Goods (CISG) where both countries are signatories, or Chinese contract law. This is a key reason to have a contract in the first place.

2. Preserve the evidence

Evidence decides most disputes. Collect and preserve:

• The purchase order, invoice, contract and any amendments.
• All emails, messages and call records between your team and the supplier.
• Payment records, bank statements and letters of credit.
• Shipping documents: bills of lading, packing lists, inspection reports and customs declarations.
• Photographs and third-party inspection certificates, ideally issued by a recognised inspection agency.

If the goods are defective, arrange for independent inspection quickly, because Chinese law allows only a limited period for raising quality objections in many cases.

3. Send a formal demand

A formal demand letter often resolves a breach without litigation. It should set out:

1. The facts of the breach.
2. The contractual or statutory basis of your claim.
3. The specific remedy you require (delivery, replacement, refund or damages).
4. A clear deadline for response.
5. Notice that you will take formal action if the matter is not resolved.

Legal demand letters carry weight in China when they come from a lawyer and are grounded in the contract. They signal that you are serious and that you know your rights.

4. Choose the right forum

If negotiation fails, you must decide where to bring the claim. The options include:

• Chinese court litigation — appropriate if the supplier's assets are in China and the contract is governed by Chinese law.
• Arbitration in China — often via CIETAC, which is typically faster, confidential, and its awards are widely enforced internationally under the New York Convention.
• Foreign litigation — possible, but a foreign judgment still usually has to be recognised and enforced against assets in China, which can be time-consuming.

The most effective route depends on where the money is, not just where you would prefer to sue.

5. Recovery and enforcement

Winning a judgment or award is only half the battle. Enforcement in China requires:

• Locating the supplier's assets — bank accounts, receivables, equipment, property.
• Applying to the competent court for enforcement.
• Using tools such as asset preservation to prevent the supplier from dissipating funds.

Speed matters. If a supplier is already in financial trouble, the money may disappear before you can enforce.

Need advice on your specific case?

Every dispute turns on its own contract and facts. If you are facing a breach by a Chinese supplier, email me for a confidential assessment of your position.