Business with China: How to Manage Payment Risks?

24 June 2022

The China-Italy Chamber of Commerce together with Confindustria organized the webinarManaging Payment Risks and Credit Recovery with Chinese Companies” on June 22nd.

During this webinar, we supported companies in understanding how to deal effectively with cross-border payments and contractual terms in doing business with China.

"Value based management is the compass for any company decision and is now, more than ever, essential to sustain the business in the Chinese market environment, today uncertain and with areas of risk. It is CICC mission, as part of the Italian System in China, to inform and make available to our companies all the support and information needed to better protect our investments, minimize the risks, and boost our market penetration.

This collaboration with Confindustria also shows our commitment and focus not only on Italian companies localized in China, but also PMI open towards the China market."

Paolo Bazzoni, Chairman of the China-Italy Chamber of Commerce


"In this phase of gradual recovery of international activity and trade, China continues to represent an essential partner for Italian companies, both in terms of trade and investment. The reference regulatory framework in China has deeply changed in the last years and it is important to provide Italian companies the right tools in order to operate in compliance with the rules."

Raffaele Langella, International Affairs Director at Confindustria


Our first experts, Mr Guilherme Campos, International Business Advisory Manager, and Ms Lynn Shen, Assistant Manager Corporate Accounting Services at Dezan Shira & Associates, guided the audience into payment formalities and contractual terms including sources and risk evaluation for preliminary information collection on Chinese partners, due diligence investigation, contractual payments and terms and managing cross- border payments in China.

Insights for companies: 1. Cooperation with the Chinese Partner is important in the information collection process; 2. The importance to have a contract and the choice of law and jurisdiction is key; 3. Payments are subject to the tax, important to define in the contract which party bears it.

Navigating China Cross-Border Foreign Exchange Transactions is another fundamental aspect for risk management. We covered it with Ms Elaine Feng, International Business Department, Bank of Shanghai Headquarters. Ms Feng provided an overview of the foreign exchange regulatory framework and its impact. She focused on cross borders transactions, costs and benefits of using the letter of credit, financial guarantees and credit system. 

Her Suggestions: checking the grade rate in the classification system for trade in goods could be an asset in evaluating the qualifications of a business partner in China

Our last speaker, Mr Matteo Zhi, Senior Partner at D’Andrea&Partners Legal Counsel, discussed the actions for credit recovery presenting the entire process and providing suggestions on how to choose the appropriate judiciary division. His suggestions include: 1. Before taking legal initiatives to recover a credit in China, foreign entities shall perform background checks on the defaulting party; 2. It is advisable that foreign companies avoid to select a foreign jurisdiction for settling disputes in their contract with Chinese suppliers; 3. It is always advisable to resort to pre-trial property preservation measures to increase the chances of credit recovery.

The webinar was moderated by Mr Carlo Geremia, CICC IPWG Coordinator.

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