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A multibillion-yuan business waits for official go-ahead

By Wang Chao (China Daily)
Updated: 2010-10-15 11:00

Soft approach

Steps that US companies take to collect debts owed by Chinese companies:

1. A debt collection agency (with a presence in China) assigned by the US creditor will contact the Chinese debtor, asking him to pay.

2. The agency will follow up with phone calls and visits to discuss payment options.

3. The agency will make many visits, sometimes even meeting the debtor for dinner to come up with an amicable payment plan and to establish friendship during the course of recovery efforts.

4. At this stage, an attorney's letter will be sent to the debtor.

5. The last stage is to file a lawsuit. But it depends on the situation, such as the debtor's ability to pay.

Slave to your dues

Tactics such as violence, intimidation and other forms of scandalous corruption were prevalent in the history of debt collecting in China.

For instance, in China's feudal times usury was protected and debt defaulters were severely punished. Though such punishment is morally reprehensible, there never has been any legal basis to justify its prohibition.

Indeed, the history of debt collection in China can date to the Spring and Autumn Period (770-476 BC). In those times, debt slavery was one of the major sources of slavery.

Debt slaves, by definition, pertain to the debtors and their families were forced to become slaves because they could not repay the money. In rural areas, farmers who went bankrupt were immediately reduced to the bottom of society as a farm laborer.

Though debt slavery was abolished in the codes of the Qin Dynasty (221-206 BC), the tradition remained. More often, the debtors could not escape servitude.

The punishment for people not paying debt can be clearly found in the law of the Song Dynasty (960-1279). For instance, creditors could have debtors scourged or beaten with a stick.

Although the use of violence to collect debt was prohibited in the Ming Dynasty (1368-1644) and the Qing Dynasty (1644-1911), the government still penalized those who failed to repay debts.

The person with long-term unpaid debt could be imprisoned.