Dezan Shira Experts Share Insights on Managing Payment Risks with Italian Companies in China

On June 22 2022, International Business Advisory Manager, Guilherme Campos and Assistant Manager of Corporate Accounting Services, Lynn Shen, spoke at the webinar “Managing Payment Risks and Credit Recovery with Chinese Companies”, co-organized by the China-Italy Chamber of Commerce and Confindustria.

China remains an important trade and investment partner for Italian companies, making it essential for investors to keep up with regulatory changes and ensure they are operating in compliance with the rules.

During the event, our two experts guided the audience through 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.

When it comes to contractual terms with Chinese business partners, Guilherme commented, “The following are especially essential – choice of law, dispute settlement, and payment terms. From our experience, these often lead to a breakdown in the contractual relationship if not drafted properly. You should also pay special attention to the terms of delivery of the product you buy or sell, confidentiality as well as IP rights protection and non-competition – this is especially important, because counterfeiting is still a concern in China.”

Guilherme and Lynn also shared their insights on setting delivery and payment terms: “Few companies forget to include delivery time of products in the contract. However, if there are specific requirements or other terms in relation to the delivery, it is better to include them as well. These terms may include packaging and labelling, means of shipment, procedure for acceptance and inspection, etc. The more detailed the terms agreed upon, the less chance of disputes later. Payment terms should be connected to the delivery. One option that provides security is an escrow contract.”

Further Resources:

For further information about the managing risks with Chinese partners, you can find a list of articles and on-demand webinars below. You could also get in touch with our business advisory team with any questions.

• [Article] Mitigating Hidden Risks in Various Market Entry Modes
• [Article] China’s Corporate Credit Risk Classification System – What We Know
• [Article] Managing Risks Within Joint Ventures in China
• [Q&A] How to De-Risk Your Business by Verifying the Compliance of Your Chinese Partner
• [On-Demand Webinar] Know Your Chinese Partners: Case Studies for De-Risking and Managing Your Business