Why a Foreign Judgment Won't Reach a Chinese Company's Assets

Posted October 11, 2026 · By Li Xinlei (Aaron Li), Partner, H&C (Jinan) Law Firm

You won. There is a judgment in your favour, the defendant is a Chinese company, and the assets you want are sitting in China. Most buyers at this point assume the difficult part is behind them. It is not. A court judgment is only as useful as the mechanism that lets you enforce it where the money is, and for most foreign judgments that mechanism does not exist. This is not a procedural technicality. It is the most expensive misunderstanding in cross-border trade, and it is usually created years earlier, when the contract was signed.

The short answer

A foreign court judgment is generally not enforceable in China unless China has a treaty with your country that covers it, or a Chinese court is willing to find reciprocity. A foreign arbitral award is a different instrument: China has been a party to the New York Convention since 1987, and awards are generally enforceable. If you still have a choice at the drafting stage, the dispute resolution clause is what decides whether a future win is worth anything.

Two pieces of paper, two very different outcomes

Buyers use "we won" to describe two situations that have almost nothing in common.

The first is a judgment from a court in your own country. It is an expression of that state's judicial authority, and it stops at the border unless another state agrees to recognise it.

The second is an arbitral award. It is the product of a private tribunal the parties chose by contract, and it travels between countries under a treaty with more than 170 signatories.

The practical difference in China is close to absolute. One route usually ends at the border. The other usually works.

Why Chinese courts do not recognise most foreign judgments

China is not a party to the 2019 Hague Judgments Convention, which was designed to make judgments circulate the way arbitral awards do. Recognition of a foreign court judgment in China therefore depends on one of two things:

• a bilateral judicial assistance treaty between China and the country where the judgment was given, or
• the principle of reciprocity, established case by case.

China has such treaties with a number of countries — France, Italy, Spain, Russia and Poland among them — but the list is far shorter than the list of countries with which China trades. If your judgment comes from a country outside that group, you are relying on reciprocity.

Reciprocity has loosened considerably. Chinese courts have become more willing in recent years to find that a foreign judgment should be recognised where the foreign court would do the same for a Chinese judgment, and the older requirement of a proved precedent has given way to a more flexible assessment. But the standard is still applied unevenly between courts and between jurisdictions, and "unevenly" is not a basis on which to plan a recovery.

The consequence is blunt: a judgment obtained at home against a supplier whose assets are all in China is, in many cases, a document rather than a payment.

Why arbitration is structurally different

China has been a party to the New York Convention since 22 April 1987. A foreign arbitral award is therefore enforceable in China on a recognised treaty basis, and the grounds on which a Chinese court may refuse enforcement are limited and specific — essentially procedural defects, matters outside the scope of the submission to arbitration, and public policy.

For a creditor, the difference is between asking a court to accept your country's judgment as its own, and asking a court to apply a treaty both countries signed. The second request is far easier to win.

This is why the dispute resolution clause in a supply contract matters more than buyer and seller usually think when they sign it. It is not boilerplate. It is the clause that decides whether the win you eventually obtain can be converted into money.

The three routes that actually recover money

Two of these three require something you either have or do not have by the time the dispute arises. Only the first two are enforcement routes in the strict sense; the third is a new case wearing the clothes of the old one.

If you already hold a judgment, do four things now

First, establish whether a treaty exists. Check whether your country and China have a bilateral judicial assistance treaty that covers the recognition and enforcement of civil and commercial judgments. This is a defined question with a defined answer, and it determines which of the routes above is open to you.

Second, find out whether there is anything to take. A treaty right is worthless against an empty account. Before spending money on recognition, look for concrete assets: bank accounts, real property, equity in other companies, vehicles, inventory, plant and machinery, and receivables owed to the debtor by third parties. Public records in China will confirm the company's registration status and any unsatisfied judgments against it; they will not show the bank balance. If you have no asset lead at all, be candid about it early — it changes the strategy from enforcement to investigation.

Third, secure the asset before it moves. Recognition can take months. During that time the debtor can transfer what it holds. Asset preservation (财产保全) lets a court freeze assets pending the outcome — bank deposits for up to one year, movable property for up to two years, real property for up to three — and in urgent cases the court must rule within 48 hours. Security is normally required; in preservation applied for during proceedings it is commonly capped at around 30% of the value preserved, while pre-litigation preservation usually requires security covering the full amount and must be followed by proceedings within 30 days. In practice this is the point at which recoveries are won or lost.

Fourth, check the numbers before the sentiment. China-side recovery runs on cost-benefit, not on principle. For a claim below roughly USD 10,000, the cost of recognition and enforcement will often exceed what you can collect, particularly if asset investigation is needed. That calculation should be made before the first application fee is paid, not after.

The clause that decides all of this, years earlier

Almost every buyer who ends up holding an unenforceable judgment had the opportunity to avoid it, and it was cheap at the time. The clause should do four things: name a specific arbitral institution (in China-related trade, CIETAC is the usual choice); fix a seat of arbitration; fix a language; and state who pays costs. A clause pasted from an unrelated template — or a clause that refers vaguely to "arbitration in China" without naming an institution — is not merely weak. Under Chinese law it may be invalid, which means the arbitration you thought you had is not available at all.

If you want to understand this at the point where it can still be fixed, the steps for a buyer before signature are set out in a buyer's checklist before the first deposit moves.

When enforcement is not worth the cost

Enforcement is a commercial exercise, and it fails as a commercial exercise in three situations: the debt is small relative to the cost of a properly run China-side application; the debtor has no traceable assets and no ongoing trading activity to preserve; or the debtor has already been dissolved. In each case the honest answer is that the money is gone, and the rational response is to stop paying for recovery and spend the next effort on making the following contract enforceable.

Frequently asked questions

Can I enforce a US or UK court judgment in China?

Generally not directly. Neither country has a bilateral judicial assistance treaty with China covering judgment recognition, so recognition would depend on a Chinese court accepting reciprocity. Recent practice has become more receptive, but it remains uncertain and varies between courts. An arbitral award is the more reliable instrument for China-related disputes.

How long does recognition of a foreign arbitral award take in China?

The application is made to the competent Intermediate People's Court. Preservation can be granted far faster than recognition, which is why securing assets early matters more than the recognition timetable itself. The limitation period for applying to enforce is two years.

What if the Chinese company has no assets?

Then the treaty basis makes no difference. Enforcement against an empty shell yields the same result as enforcement against a dissolved one. Asset investigation should come before the enforcement application, not after.

Does an arbitration clause always beat litigation?

For enforcement in China, yes, in most cases — provided the clause names a specific institution and is otherwise valid. A defective clause is worse than no clause, because it can leave you without a usable forum at all.

If you are holding a judgment and the assets are in China, find out what route is actually open before you spend anything

Send me the judgment or award, the contract's dispute resolution clause, and whatever you know about the defendant's assets in China. Within 24 to 48 hours you will get a written view of which enforcement route applies, whether there is anything to attach, and what the pursuit would cost against what it could return. What comes back cannot be known in advance — it depends on the debtor's assets and the evidence — but you can establish where you stand before committing to a procedure.

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About the author

Li Xinlei (Aaron Li) is a partner at H&C (Jinan) Law Firm in Jinan, Shandong, where he acts for foreign companies and individuals in international trade disputes, cross-border enforcement and construction claims. He has five years of international engineering and market development experience in the Middle East and South Asia, and writes on China trade lawyer practice for buyers rather than for search engines.

Originality statement: This article is based on matters handled by the author and is intended to provide general legal information and practical reference. For reprinting or citation, please indicate the original source (this website link / article link) and the author's information. We respect original creation and knowledge sharing, but firmly oppose any form of infringement.

Disclaimer: This article provides general legal information and does not constitute legal advice for any specific case. Cross-border disputes are fact-specific and the position in your matter may differ. Treaty practice, reciprocity findings and procedural requirements change, and should be verified for your jurisdiction before you act. Please consult and appoint a qualified lawyer for your own case.