Your Contract Is in Chinese Too: Governing Language, Chops and Disputes
China Field Notes · by Daona · 13 min read
Most contracts with Chinese companies are never litigated. The ones that are get read by a Chinese judge or arbitrator, in Chinese, under rules you may not have chosen. Writing the contract with that reader in mind is the cheapest insurance you will ever buy.
A foreign buyer negotiates for weeks in English. The lawyers at home approve the draft, and on signing day the Chinese side sends a version with a Chinese column next to the English. Nobody on the foreign side reads Chinese, the meeting is running late, and the counterparty's seal goes on every page.
Two years later there is a dispute about late delivery. The Chinese column says something slightly different about the delivery date. The contract does not say which language prevails. It names "the courts of the place where the contract was signed" — the supplier's city.
None of this is unusual, and none of it is hard to avoid. This issue covers the clauses that decide what happens when something goes wrong. It builds on Issue 06 (company chops) and Issue 07 (checking your counterparty) rather than repeating them.
Foreign-related contracts can choose
Under the Law on the Application of Laws to Foreign-related Civil Relations (涉外民事关系法律适用法), parties to a foreign-related (涉外) contract may choose its governing law. A contract is generally foreign-related if a party is a foreign individual or company, a party is habitually resident abroad, the subject matter is abroad, or the facts creating or ending the relationship happen abroad.
A supply contract between your company in Germany and a factory in Zhejiang is foreign-related. You may choose German, English, Hong Kong or PRC law.
Two Chinese companies usually cannot
Your WFOE (外商独资企业) is a Chinese legal person. A contract between your WFOE and a Chinese supplier, signed and performed in China, is usually not foreign-related just because of the foreign parent. Chinese courts have repeatedly treated such contracts as domestic: PRC law applies even if the contract says otherwise. Civil Code Article 467 also requires certain contracts performed in China, such as Sino-foreign joint venture contracts, to be governed by PRC law.
Our view
For contracts performed in China, PRC law is not a defeat. The Civil Code (民法典) is a modern codified contract law that Chinese tribunals apply daily. A foreign law that a Chinese tribunal must research and apply through expert evidence often adds cost without adding protection. Foreign law makes most sense when performance or dispute resolution is largely outside China.
Bilingual contracts are standard. The risk is a bilingual contract that does not say which version prevails. Civil Code Article 466: where a contract is in two or more languages agreed to be equally authentic, the words are presumed to mean the same; if they differ, they are interpreted in light of the contract's purpose. If you do not choose, a tribunal reconciles the texts — and reads the Chinese one with more confidence.
Chinese courts work in Chinese. The Civil Procedure Law (民事诉讼法) requires courts to use the language commonly used in China, and foreign-language evidence needs a Chinese translation. Even with "English prevails", a court works from a translation, often produced under time pressure. In arbitration, the parties can agree on English.
· Write a prevailing-language clause (以…文本为准). If Chinese must prevail, have the Chinese checked by someone working for you
· Check the Chinese of the key terms: price, currency, quantities, specifications, delivery, acceptance, payment, warranty, termination, liquidated damages
· Keep defined terms consistent in both languages
· A later Chinese-only supplementary agreement (补充协议) or order can amend the main contract — read it with the same care
Civil Code Article 490: a written contract is formed when the parties sign, seal or fingerprint it. Chinese counterparties treat the company seal (公章) or contract seal (合同专用章) as the real commitment. Ask for the seal and the signature of the legal representative or an authorised signatory with a written authorisation (授权委托书), plus cross-page seals (骑缝章). Details in Issue 06.
Use the exact registered Chinese name and the 18-character Unified Social Credit Code (统一社会信用代码) in the party block. The English name has no legal status. Issue 07 shows how to check both.
Electronic signatures. The Electronic Signature Law (电子签名法) gives a reliable electronic signature the same effect as a handwritten signature or seal — broadly, one under the signatory's sole control, where later changes can be detected. E-contract platforms using certified electronic seals are widely used; a pasted image of a seal is not the same thing. A few documents are excluded, such as those on marriage, adoption, succession and the termination of public utilities.
Courts in China
A people's court hears the case in Chinese under Chinese procedure. Courts can move quickly in many commercial cases and can order asset preservation (财产保全) early. Where all the counterparty's assets are in China, a Chinese court is often realistic.
The amended Civil Procedure Law, in force since 1 January 2024, lets courts hear foreign-related disputes with "other appropriate connections" (其他适当联系) to China, and gives them exclusive jurisdiction over the establishment, dissolution and liquidation of legal persons formed in China.
Foreign courts
A home-country judgment helps only if it can be enforced where the assets are. Mainland courts recognise foreign judgments on treaties or reciprocity; practice has opened up, but outcomes are less predictable than for arbitral awards. Since 29 January 2024, a broader mainland–Hong Kong arrangement on civil and commercial judgments has been in operation.
Arbitration
· Enforcement: China has been in the New York Convention since 1987
· Language and arbitrators: English and mixed nationalities can be agreed
· Confidentiality: arbitration is private; court cases generally are not
| Institution | Seat |
|---|---|
| CIETAC 中国国际经济贸易仲裁委员会 | Beijing, with sub-commissions |
| SHIAC 上海国际仲裁中心 | Shanghai |
| SCIA 深圳国际仲裁院 | Shenzhen |
| HKIAC 香港国际仲裁中心 | Hong Kong |
SIAC (Singapore) and the ICC are also common in larger contracts.
Hong Kong's special position. Since 1 October 2019, parties to a Hong Kong-seated arbitration administered by a listed institution (including HKIAC) can ask mainland courts for interim measures — preservation of property, evidence or conduct. Hong Kong is the only seat outside the mainland with this benefit. Separate arrangements cover enforcement of Hong Kong awards.
Domestic disputes stay domestic. A non-foreign-related dispute, such as WFOE vs Chinese supplier, generally cannot go to an institution seated abroad, with a limited exception for certain free trade zone companies. Check before copying your group's "SIAC, Singapore" clause.
The revised Arbitration Law (仲裁法) — adopted 12 Sep 2025, in force 1 Mar 2026
· Seat of arbitration (仲裁地) recognised for foreign-related disputes
· Ad hoc arbitration allowed only for certain foreign-related maritime disputes and foreign-related disputes involving enterprises in free trade zones and designated areas
· Foreign institutions may set up business offices in FTZs, the Hainan Free Trade Port and approved areas for foreign-related cases; Shanghai's Lingang New Area (临港新片区) has allowed registration since a 2019 pilot
· Online arbitration expressly recognised
· Time limit to set aside an award cut from six months to three
A usable clause names: (1) arbitration, not "arbitration or litigation"; (2) one institution, spelled correctly; (3) the seat; (4) the rules; (5) the language; (6) the number of arbitrators. Two-option clauses are a classic reason arbitration agreements fail in Chinese courts.
Liquidated damages (违约金). Civil Code Article 585 lets a tribunal, on request, reduce an amount excessively higher than the loss, or raise one that is lower. The Supreme People's Court's 2023 contract interpretation says an amount exceeding the loss by more than 30% can generally be seen as excessive — a guideline, not a hard cap. Keep evidence of actual loss.
Limitation period. Civil Code Article 188: generally three years from when you knew or should have known of the harm and who caused it; four years for international sale of goods and technology import/export contracts. Written demands can interrupt it.
Notices. Name addresses, emails and recipients, and when notice is deemed received. Courts use them for service. A sales manager's WeChat is not a notice clause.
Acceptance and payment. Define inspection period, standard, who inspects, and deemed acceptance; tie staged payments to it. Many disputes are "not accepted" vs "deemed accepted".
IP and confidentiality. State who owns tooling, moulds, drawings and improvements. For manufacturing, a Chinese-law, Chinese-language NNN agreement (non-disclosure, non-use, non-circumvention) is usually more practical than a home NDA. Register trademarks first (Issue 19).
| Feature | Chinese court | Mainland arbitration | Hong Kong arbitration |
|---|---|---|---|
| Language | Chinese | Chinese unless agreed; English possible | Usually English |
| WFOE vs Chinese supplier | Yes | Yes | Generally no |
| Mainland asset freezing | Directly | Through the court | Under the 2019 arrangement |
| Mainland enforcement | Direct | Direct, via court | Mainland–HK arrangement |
| Enforcement abroad | Treaty or reciprocity | New York Convention | New York Convention |
| Confidential | Generally public | Private | Private |
| Relative fees | Lower | Moderate | Higher |
Illustrative. Typical features, not statistics; cost and duration depend on amount, institution, counsel and facts.
Liquidated damages, worked through
Clause for late delivery: ¥2,000,000
Proven loss: ¥1,000,000
30% guideline reference: ¥1,000,000 × 1.3 = ¥1,300,000
If the seller asks for a reduction, the award may land near the reference, higher or lower depending on fault and circumstances — but rarely the full ¥2,000,000.
Illustrative.
"The English version is the real contract." Only if the contract says so — and a Chinese court still reads a translation.
"We chose English law, so English law applies." Not between two Chinese entities in a domestic contract.
"Our group template sends everything to Singapore." Fine overseas. For your WFOE's domestic contracts, check first.
"A court in my country is safer." Only if there are assets there, or the judgment can be enforced in China.
"Liquidated damages are guaranteed." They can be reduced on request.
"The supplementary agreement is just paperwork." Stamped, it can change price, delivery and payment.
Your contract checklist
☐ Exact Chinese name and credit code in the party block
☐ Governing law checked: foreign-related or domestic?
☐ Prevailing-language clause; Chinese of key terms checked
☐ Seal plus authorised signature; authorisation; cross-page seals
☐ E-signatures only via a recognised platform
☐ Dispute clause: one forum, institution, seat, rules, language, arbitrators
☐ Forum matches where the assets are
☐ Liquidated damages proportionate to likely loss
☐ Notice addresses, emails and recipients
☐ Acceptance procedure and staged payments
☐ IP, tooling and confidentiality covered; trademarks registered
☐ Reply CHECK for our Partner Background Check Checklist
Rules as of October 2026. This column provides general information, not legal advice. Contract drafting and legal opinions should be done by a licensed lawyer; for contracts of significant value, have a licensed PRC lawyer review the Chinese text before signing.
China Field Notes · by Daona