The following is a de-identified composite based on matters our team has handled. Client and counterparty identities are anonymized and details are generalized. Past results do not guarantee similar outcomes in other matters; every case turns on its own facts.
The situation
A US importer wired a 30% deposit — roughly USD 180,000 — to a Chinese supplier for a first container order of components. The supplier had passed a basic registry check, the samples were good, and the paperwork looked in order. After the deposit cleared, communication slowed, then stopped. The goods were never produced. The buyer was being ghosted.
The first 48 hours: evidence and asset preservation
In cross-border disputes, the first days decide recoverability, not the merits. Our first moves were:
- Locking evidence: the contract, the purchase order, the wire transfer records, the full email and chat history, and the supplier's business licence and Unified Social Credit Code.
- Confirming identity: matching the bank beneficiary to the registered company name — a mismatch here changes the entire case.
- Filing for property preservation: under the PRC Civil Procedure Law, a court may freeze a defendant's bank accounts and other assets, and pre-suit preservation can be ruled on within 48 hours. We moved to freeze before funds could be moved further.
Asset preservation (财产保全) is the single highest-leverage tool available to a defrauded buyer. A supplier that can be sued is far more cooperative once its operating account is frozen.
The legal tools, used in sequence
- Demand letter (律师函): a formal letter from counsel, stating the breach and the consequences of non-payment. It records the default, starts the limitation clock cleanly, and often triggers settlement on its own.
- Breach and termination: the PRC Civil Code provides for liability for breach of contract (Article 577), termination of the contract (Article 563), and damages (Articles 584–585). With the supplier in clear default, the contractual basis was straightforward.
- Arbitration or litigation: the contract provided for China-seated arbitration. A valid arbitration clause excludes court jurisdiction, and an award is enforceable under the New York Convention — which China acceded to in 1986, with the reciprocity and commercial reservations.
- The fraud lever: because the supplier had taken the deposit and disappeared, the facts pointed to possible contract fraud (合同诈骗罪) under Article 224 of the PRC Criminal Law, which expressly covers taking prepayment and absconding. We raised a criminal complaint with the public security bureau — a step that concentrates the mind of the individuals behind the company, not just the shell.
The outcome
Once the supplier's operating account was frozen and the criminal complaint was on the table, the principals re-emerged. We negotiated a recovery of the deposit plus a share of the buyer's wasted costs, secured by a payment schedule, without needing to litigate to final judgment. In our experience, the buyers who recover are usually the ones who move fast and use every lever — civil, arbitral and criminal — rather than writing the money off.
What this means for other buyers
- Preserve evidence the moment something feels wrong — contracts, payments and communications are the entire case.
- Verify the beneficiary matches the registered company before you ever wire a deposit.
- Put an arbitration clause with a China seat in the contract — it is the difference between an enforceable award and an uncertain path.
- Move on asset preservation early. A frozen account is worth more than a perfect legal theory.
For more on the remedies available to defrauded buyers, see How to Solve Disputes with Chinese Suppliers, or contact us to discuss your situation.
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