In the world of international trade, encountering a "bad" supplier can be a nightmare for any business. Whether it’s a "disappearing act" after receiving your deposit or shipping goods that don't match the description, you have legal tools in China to fight back.
Here is a professional legal breakdown for your clients at www.hirelawfirm.cn on how to handle sourcing fraud.
Sourcing Fraud in China: A CEO's Legal Recovery Guide (2025/2026)
1. Identify the Nature of the Offense
The first step is determining whether your situation is a Civil Dispute or Criminal Fraud.
Civil Dispute (Contract Breach): The company exists, but they sent low-quality goods or are late on delivery. This is a "Breach of Contract."
Criminal Fraud (Contract Scam): The company used a fake name, forged documents, or never intended to ship anything. Under the PRC Criminal Law, this is classified as "Contract Fraud" (合同诈骗罪).
2. Immediate "Emergency" Actions
Before the trail goes cold, you must:
Freeze the Trail: Save all WeChat histories, emails, and bank transfer records. In China, electronic evidence is legally binding if properly authenticated.
Verify the Business License: Use the National Enterprise Credit Information Publicity System to see if the company is still "Active" or has been blacklisted.
Halt Payments: If you paid via credit card or a platform like Alibaba (Trade Assurance), file a dispute immediately.
3. Three Routes to Recovery
Route A: The Demand Letter (The "Warning Shot")
A formal letter from a Chinese law firm (with an official red stamp/chop) is often enough to scare "gray-area" suppliers into a refund. It signals that you are willing to spend the money to sue them.
Route B: Reporting to the Police (PSB)
If it is a clear scam (disappearing after deposit):
File a report with the Public Security Bureau (PSB) in the city where the supplier is registered.
Note: Chinese police are more likely to take the case if you can prove multiple victims are involved, as this meets the "large amount" threshold for criminal prosecution.
Route C: Litigation & Arbitration
If the amount is significant ($50,000+), you can sue in a Chinese court.
The Advantage: China’s courts are surprisingly efficient for commercial cases, often reaching a verdict within 6 months.
The "Asset Freeze": Your lawyer can apply for a "Property Preservation" order to freeze the supplier's bank accounts before the trial begins, ensuring there is money left to collect.
4. How to Prevent This (Thewww.hirelawfirm.cn Checklist)
To avoid these headaches in 2026, always implement these three safeguards:
Bilingual Contracts: Never rely on an English-only PO. Use a contract governed by Chinese Law and written in Chinese, which allows for much faster enforcement.
Verify the "Legal Rep": Ensure the person you are talking to is actually authorized to sign for the company.
On-Site Inspection: For large orders, hire a 3rd party to inspect the goods before the final 70% payment is released.
Summary Table for Decision Making
| Scenario | Primary Action | Cost | Success Rate |
| Silent after Deposit | Police Report (Criminal) | Low | Medium |
| Goods Not as Described | Civil Lawsuit / Arbitration | High | High (if contract is solid) |
| Minor Delay | Demand Letter | Low | High |
Partner withwww.hirelawfirm.cn
Don't let a fraudulent supplier jeopardize your supply chain. We provide:
Supplier Due Diligence: We check their litigation history and real assets before you pay.
Rapid Response: If you've been scammed, our local teams can visit the factory site within 48 hours.
Litigation Support: We represent foreign companies in Chinese courts to recover lost funds.
"The best time to hire a lawyer was before you sent the deposit. The second best time is now."
