The deposit is paid, the goods never shipped, and the person who signed your contract has stopped answering. The next decision — sue or report — shapes everything that follows: who controls the process, how fast it moves, and whose pockets the outcome can actually reach. Here is the line between the two tracks, drawn honestly, and how to choose.
"I paid the deposit and the supplier disappeared" is a sentence I hear from foreign buyers more often than any of us would like. My first job in those cases is not to pick a court — it is to help pick a track. China runs commercial wrongdoing on two rails: a civil lawsuit that you control, and a criminal report that the state controls. The two tracks move at different speeds, run on different evidence rules, and reach different pockets. Choosing the wrong one costs months; choosing well is often the difference between recovery and an expensive lesson. This guide draws the line between them honestly, then gives you the checklist for choosing.
At one end sits an ordinary commercial failure: a real factory with real machines that performed badly — late delivery, quality below spec, cheaper material substituted. The owner still answers the phone and still wants your next order. That is a breach of contract, and a breach of contract is a civil problem, full stop.
At the other end sits the pure shell: a company registered weeks before your wire landed, at a rented address, with a bank account opened to receive exactly one payment. No equipment, no staff, no supply chain, no intention. The contract was never a plan; it was bait. That pattern is not a performance dispute — it is theft wearing a contract as a costume, and Chinese criminal law has a specific name for it.
Most cases live in the gray middle, and honesty requires saying so up front: the trading company that took on more orders than it could perform and went quiet when its cash ran out; the factory that performed — for someone else, after selling your allocated goods onward; the supplier that delivered sixty percent and stopped answering. Until the registry records, the money trail and the message history have been pulled apart, you often cannot know which end of the spectrum you are standing on.
Why does the legal line matter so much? Because the two tracks differ in the three dimensions that decide real outcomes: who controls the pace, who pays for the investigation, and what each track can actually take back.
Chinese criminal law addresses the shell end of the spectrum directly. Article 224 of the PRC Criminal Law criminalizes contract fraud: defrauding the other party of property in the course of concluding or performing a contract, with the intent to illegally possess that property, where the amounts cross the thresholds at which public security authorities are required to open and investigate a case. The statute enumerates the classic patterns, several of which read like the case files foreign buyers bring me: taking delivery of goods, payments or deposits and then fleeing; signing in a fictitious name or through a borrowed entity; using forged or altered documents to win the deal.
The phrase that does the real work is intent to illegally possess. Nobody reads minds; investigators read patterns. In practice, the facts that convince a public security bureau to take a case look like this:
No single fact on that list is decisive on its own. The combination is what separates fraud from failure — and of all five, fast dispersal through personal accounts is the one investigators weight most heavily, because honest companies do not move deposits to a bookkeeper's cousin within 48 hours.
| Civil suit | Criminal report | |
|---|---|---|
| Who runs it | You, through counsel — you control filing, scope, pace, settlement | Police and prosecutors — you report, then follow the process |
| Who pays | You: court fees, preservation, legal fees | The state investigates at its own expense |
| Standard of proof | Preponderance — a well-documented claim wins on paper | Beyond reasonable doubt, plus filing thresholds on amount and facts |
| Asset action | You apply for preservation against the specific defendant — how it works | Once a case is filed, investigative measures can freeze accounts quickly — but on the state's timing, not yours |
| What you get | A judgment you can enforce against the named defendant | Restitution through the criminal process, run through victim-status mechanics outside your control |
| Speed | Months to years, end to end | The filing decision can be fast after a proper report; the case itself moves at the state's pace |
| Key risk | Wrong defendant means a judgment against an empty pocket | A criminal case on the same facts can stall your civil suit |
Two structural points deserve emphasis, because foreign buyers routinely miss both.
First, a civil judgment is only as good as the entity you named and the assets it actually owns. Enforcement afterwards reaches only what exists — which is why defendant selection and asset mapping happen before filing, not after. In the criminal track, recovery runs through restitution ordered within the criminal process, and the mechanics of victim status — who qualifies, in what order, against which recovered assets — sit entirely outside your control.
Second, the tracks interact. Where the same facts appear to constitute a crime, Chinese procedure allows civil matters to be transferred for investigation or suspended while the criminal case runs — and a suspended civil case can sit for a long time. The flip side: some civil claims proceed on a legal basis different from the criminal theory, so running both is sometimes coherent and sometimes self-defeating. It is fact-specific — resolve it with counsel before filing anything anywhere.
Four factors decide the choice. Work through them in order:
Where to report: the public security bureau at the place where the contract was concluded or performed, or where the suspect entity is domiciled. For cross-border trade deals that usually means the locality of the receiving bank account or the company's registered address. A report bounced to the wrong jurisdiction loses weeks.
What to submit. A report that gets filed looks like a case file, not a complaint. The pack:
Why a lawyer-drafted report matters: the filing decision turns on whether the report maps facts onto the elements of the offense with a clean evidence index — or reads as a pile of screenshots and indignation. The filing thresholds are real and they are applied; a report written against them simply processes faster.
Notice something asymmetric: every entity that pulls this pattern fails the cheap checks. The payee account name does not match the contracting company — the account-name test flags it in seconds. The registration is weeks old, litigation-free because it has never done anything, and addressed to a shared office — a proper verification pass flags it in minutes.
Which means the honest summary of this entire article is: a verification report costs a small fraction of either track described above, and it prevents most of the cases that would ever need them. This article is the expensive version of the same lesson.
This article is general information, not legal advice, and does not create an attorney–client relationship. Whether facts support a civil claim, a criminal report, or both is case-specific and changes with the evidence. Nothing here is a guarantee of results.
Send the contract, the payment records and the chat history. I will map the entities, weigh the intent evidence, and give you a straight recommendation: civil suit, criminal report, or both in sequence.
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