China Commercial Fraud Recovery: Civil, Criminal and Asset-Freezing Remedies

Introduction

Commercial fraud in China is pursued on three tracks at once — civil rescission, criminal prosecution and asset freezing — and the parties who recover are usually the ones who move on all three together. This guide maps the civil, criminal and interim remedies available to a foreign victim of commercial fraud, and the order in which to use them.

The civil track: rescission and damages

Under Articles 148 to 152 of the Civil Code, a contract induced by fraud is voidable: the defrauded party may apply to a court or arbitral tribunal to rescind it, and the right of rescission must be exercised within one year from the date the party knew or should have known of the fraud, and in any event within five years from the date of the act. The same conduct also grounds a damages claim in tort. The civil track recovers the loss; it is slow, and it does not by itself stop the fraudster from dissipating assets — which is why it is combined with the other two.

The criminal track: fraud and contract fraud

The same scheme is often also a crime. Article 266 of the Criminal Law punishes fraud, and Article 224 punishes contract fraud — obtaining property in the course of signing or performing a contract, by false pretences or other means, with intent to illegally possess. The criminal track matters to a victim for two reasons: a criminal case brings the coercive investigative power of the public security organs to find assets and people, and Article 101 of the Criminal Procedure Law allows a victim to attach a civil claim for compensation to the criminal case, recovering without a separate civil suit.

Freezing the assets before they vanish

None of the above helps if the money is gone by the time you win. Interim measures are the tool: under Articles 103 to 108 of the Civil Procedure Law, a party may apply for property preservation to freeze bank accounts, seize assets or preserve evidence. For urgent pre-action situations, Article 104 allows an interested party to apply for preservation before filing suit — the court must decide within 48 hours, and the applicant must then file the lawsuit or arbitration within 30 days or the preservation lapses. In practice, a prompt pre-action freeze is what turns a fraud recovery from a paper judgment into money in hand.

Putting the tracks together

• Move early — a pre-action freeze under Article 104 of the Civil Procedure Law works only if the assets are still there.
• Preserve the evidence — the contract, the payment records, the correspondence and the identity of the counterparty, because both the civil rescission and the criminal complaint are decided on documents.
• File the criminal complaint — a contract fraud report to the public security organs brings investigative power and the possibility of an incidental civil claim under Article 101 of the Criminal Procedure Law.
• Run the civil claim — rescission under the Civil Code recovers the loss and confirms the fraud in a judgment that can be enforced.
• Enforce against the frozen assets — a judgment or award against an account that was frozen at the outset is how the recovery is actually collected.

Practical checklist

• Assess whether the facts support fraud (Article 266) or contract fraud (Article 224), and gather the documents for both.
• Apply for pre-action property preservation under Article 104 of the Civil Procedure Law before the fraudster learns of the claim.
• File the suit or arbitration within the 30-day window to keep the preservation alive.
• Respect the one-year and five-year limits for rescission under Articles 148 to 152 of the Civil Code.
• Coordinate the civil and criminal tracks with counsel on both sides — the evidence, the timing and the asset picture are shared.
• Confirm current article numbers against the Civil Code, Criminal Law and Civil Procedure Law before citing them.