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Debt Collection in the Less Developed Regions of China: An Empirical Study from a Basic-Level Court in Shaanxi Province*

  • Xin He (a1)

Contrary to the prevailing view in the literature that Chinese courts have been notoriously incompetent in enforcement, this article contends that the situation may not be so bad. Based on in-depth fieldwork investigations of 60 debt collection cases at a basic-level court in the less developed hinterland region of China, this study finds that the majority of plaintiffs recover most of their debts through the court. Local protectionism persists, but seems to be contained within legal rules. Nevertheless, the underdeveloped economy of the region has limited the effectiveness of several core judicial reform measures. Unlike the situation in more developed regions, the forces of economic development outside the court have not been significant enough to reshape the power structure inside the court. The overall situation suggests, however, that China's efforts in the field of legal reform, including the promulgation of substantive laws as well as strengthened institution-building have, in general, been conducive to the effective processing of routine debt collection cases.

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1 China Law and Governance Review 2004, available online at, accessed 19 April 2007.

3 “Half of China's civil court rulings remain on paper,” People's Daily, 13 March 2004, available online at, accessed 20 April 2007. The title of the article indicates that half of the civil court rulings are not enforced. The article specifically mentions that according to some official estimates, the enforcement rate on loans borrowed by SOEs from banks is only 12%.

4 See Ji Tong, “2003 nian Zhongguo fayue de shenpan he zhixing zhuangkuang” (“The basic situations with regard to adjudication and enforcement of Chinese courts in 2003”), Renmin sifa (People's Judiciary), Vol. 3 (2004), pp. 7778.

5 See Clarke Donald, “The execution of civil judgments in China,” The China Quarterly, No. 141 (1995), pp. 6581 at p. 65.

6 See Trebilcock Michael and Leng Jing, “The role of formal contract law and enforcement in economic development,” Virginia Law Review, Vol. 92, No. 7 (2006), pp. 1517–80, especially p. 1554; for similar comments, see Clarke generally Donald, “Economic development and the rights hypothesis: the China problem,” American Journal Comparative Law, Vol. 51 (2003), pp. 89111; Cohen Jerome, “Reforming China's civil procedure: judging the courts,” American Journal Comparative Law, Vol. 45 (1997), pp. 793805; Lubman Stanley, Bird in a Cage (Stanford, CA: Stanford University Press, 1999); Pei Minxin, “Does legal reform protect economic transactions? Commercial disputes in China,” in Murrell Peter (ed.), Assessing the Value of Law in Transition Economics (Ann Arbor: The University of Michigan Press, 2001), pp. 180210; Moser Michael (ed.), Managing Business Disputes in Today's China: Dueling with Dragons (Leiden: Kluwer Law International, 2007).

7 Yu Guanghua and Zhang Hao, “Adaptive efficiency and financial development in China: the role of contracts and contractual enforcement,” Journal of International Economic Law, Vol. 11 (2008), pp. 459–94.

8 Landry Pierre, “The institutional diffusion of courts in China,” in Ginsburg Tom and Moustafa Tamir (eds.), Rule by Law: The Politics of Courts in Authoritarian Regimes (Cambridge: Cambridge University Press, 2008), pp. 207234.

9 Ibid.

10 Michelson Ethan, Popular Attitudes towards Dispute Processing in Urban and Rural China (Oxford: Foundation for Law, Justice and Society, 2008).

11 For an analysis of the caseload change in reform China, see He Xin, “Recent decline of economic caseloads in China: exploration of a surprising phenomenon,” The China Quarterly, No. 190 (2007), pp. 352–74.

12 See Peerenboom Randall, “Seek truth from facts: an empirical study of the enforcement of arbitral judgments in the People's Republic of China,” American Journal Comparative Law, Vol. 49, No. 2 (2001), pp. 249327; Minxin Pei et al., “A survey with corporate litigants in Shanghai,” on file with the author (2007); He Xin, “Enforcing commercial judgments in the Pearl River Delta of China,” American Journal of Comparative Law, Vol. 57 No. 2 (2009), pp. 419–56.

13 For an evaluation on the impact of judicial reforms on the courts in Shanghai, see Gechlik Mei Ying, “Judicial reform in China: lessons from Shanghai,” Columbia Journal of Asian Law, Vol. 19, No. 1 (2005) pp. 97137.

14 Xin He, “Enforcing commercial judgments.”

15 Jing-wen Zhu (ed.), Zhongguo falü fazhan baogao (1979–2004) (China Legal Development Report (1979–2004)) (Beijing: People's University Press, 2007).

16 He Xin, “Court finance and court responses to judicial reforms: a tale of two Chinese courts,” Law & Policy, Vol. 31, No. 4 (2009), pp. 463–86.

17 North Douglass C., Institutions, Institutional Change, and Economic Performance (Cambridge: Cambridge University Press, 1990); Williamson Oliver, The Economic Institutions of Capitalism (New York: Free Press, 1985); The Mechanisms of Governance (Oxford: Oxford University Press, 1996).

18 In the Pearl River Delta study conducted by He, the GDP in 2002 reached US$5,700. See Xin He, “Enforcing commercial judgments,” p. 424.

19 All socio-economic information comes from local annals.

20 For an evolution of this policy, which has had huge impact on judicial behaviour, see Zhu Jing-wen, China Legal Development Report.

21 “Susongfei jiaona banfa” (“Measures for taking litigation fees”), issued on 19 December 2006 by the State Council and implemented on 1 April 2007, available online at, accessed 29 December 2009.

22 Liao Yong'an and Li Shenggang, “Woguo minshi susong feiyong zhidu zhi yunxing xianzhuang” (“The current operational status of the system of civil litigation fees in China”), Zhongwai faxue (Peking University Law Journal), Vol. 3 (2005), pp. 304–27; see also Xin He, “Enforcing commercial judgments.” But some judges noted in court that this practice has already been abandoned since the financial pressure was lightened after the central government started subsidizing courts in the hinterland regions in 2007.

23 A sample containing 60–80 cases would probably present a picture of the normal distribution.

24 Zhang Weiying and Ke Yongzhu, “Susong guocheng zhong de nixiang xuanze jiqi jieshi” (“Reverse choice in the litigation process and its explanation”), Zhongguo shehui kexue (Social Sciences in China), Vol. 2 (2002), pp. 3143; Xin He, “Enforcing commercial judgments.”

25 In September 2002 a judicial policy on mediation was promulgated, re-emphasizing higher mediation and withdrawal rates. See “Guanyu shenli sheji minshi anjian de youguan guiding” (“Several stipulations on adjudicating mediation-related cases”), promulgated by the SPC.

26 Usually the benefits include a lower appeal rate and a simpler court decision.

27 Interview with Judge A, 14 November 2008.

28 Minxin Pei, “Does legal reform protect economic transactions?” pp. 180–210.

29 Interviews.

30 See generally, Lubman, Bird in a Cage.

31 Ibid.

32 Ma Jun and Niu Meili, “Modernizing public budgeting and financial management in China,” in Frank Howard A. (ed.), Public Financial Management (Boca Raton, FL: Taylor & Francis, 2006), pp. 691736.

33 This happened when the new measures with regard to litigation fees (effective in 2007) led to serious financial shortage for the courts in less developed regions.

34 Peerenboom Randall and He Xin, “Dispute resolution in China,” East Asia Law Review, Vol. 4 (2009), pp. 161.

35 For an analysis on the relationship between the local state and enterprises in the early stage of the reform, see Oi Jean, Rural China Takes Off (Berkeley: University of California Press, 1999).

36 “Zhongyang zhengfawei: dongyuan shehui liliang, qieshi jiejue zhixing nan” (“Central Political-Legal Committee: mobilize the resources of society, conscientiously solve the problem of court enforcement”), Xinhua, available online at, accessed 29 December 2008.

37 Article 18 of “Renmin fayuan wu nian gaige de gangyao” (“The five-year reform outlines”) states: “The court decisions shall be rendered by the chief adjudicator or the sole adjudicator according to the law by 2000.” Promulgated by the SPC on 20 October 1999.

38 Interviews with Judges A and D.

39 Interviews.

40 Not all the plaintiffs were in a position to respond to this question, because some of them withdrew their cases almost immediately after they had filed the lawsuits. Overall, only 18 cases, or 30%, entered into the compulsory enforcement stage. Only this group of plaintiffs experienced the court's enforcement abilities.

41 In the Pearl River Delta study, 71% held positive views on the adjudication phase, and only 32% were negative about the enforcement phase. See Xin He, “Enforcing commercial judgments,” p. 455.

42 Michelson, Popular Attitudes towards Dispute Processing.

43 For a study on the situation in the US context, see Tyler Tom, Why People Obey the Law (New Haven: Yale University Press, 1990).

44 The standard has been replaced with the new one and the court now is completely observant of the new standard issued by the State Council in April 2007.

45 See Hendley's Kathryn study on the Russian courts, “Enforcing judgments in Russian economic courts,” Post-Soviet Affairs, Vol. 20, No. 1 (2004), pp. 4682.

46 For a study on the small claims courts in England and Wales, see Baldwin John, Small Claims in the County Courts in England and Wales: The Bargain Basement of Civil Justice? (Oxford: Clarendon Press, 1997), p. 129; for the small claims courts of the US, see Weller Stevenet al., “American small claims courts,” in Whelan C.J. (ed.), Small Claims Courts: A Comparative Study (Oxford: Clarendon Press, 1990), p. 16; see also Best Arthuret al., “Peace, wealth, happiness, and small claims courts: a case study,” Fordham Urban Law Journal, Vol. 28, No. 2 (1994), pp. 343–79; Committee on Post-Judgment Collection Procedures in the Special Civil Part, “Report to the Supreme Court of New Jersey,” New Jersey Law Journal, No. 2 (1993), quoted in Clarke, “The execution of civil judgments in China,” p. 34.

47 Interview with Judge E.

48 Landry, “The institutional diffusion of courts in China,” pp. 207–34.

49 For the classic literature on this point, see Macaulay Stewart, “Non-contractual relations in business: a preliminary study,” American Sociological Review, Vol. 28, No. 1 (1963), pp. 5567; for a recent discussion on the situation in transitional Russia, see Hendley Kathryn, Murrell Peter and Ryterman Randi, “Law, relationships, and private enforcement: transactional strategies of Russian enterprises,” Europe-Asia Studies, Vol. 52, No. 4 (2000), pp. 627–56; Hendley Kathryn, “Business litigation in the transition: a portrait of debt collection in Russia,” Law & Society Review, Vol. 38, No. 2 (2004), pp. 305–48.

50 Minxin Pei, “Does legal reform protect economic transactions?” pp. 180–210.

51 Peerenboom, “Seek truth from facts,” pp. 249–327

52 For a recent example, see Friven Yeoh, “Enforcement and dispute outcomes,” discussing the enforcement of foreign-related arbitration awards in China, in Moser, Managing Business Disputes in Today's China, pp. 289–90.

53 From the context of the China Law and Governance Review 2004 and Tong Ji, “The basic situations with regard to adjudication and enforcement,” at p. 78, one does not know if the enforcement rate refers to full performance, nor if the remainder was only partially enforced or not enforced at all.

54 Tong Ji, “The basic situations with regard to adjudication and enforcement,” at p. 78.

55 Sharlet Robert, “Stalinism and Soviet legal culture,” in Tucker Robert C. (ed.), Stalinism: Essays in Historical Interpretation (New York: Norton, 1977), pp. 155–79; for a recent analysis, see Fu Yulin and Peerenboom Randall, “A new analytic framework for understanding and promoting judicial independence in China,” in Peerenboom Randall (ed.), Judicial Independence in China (Cambridge: Cambridge University Press, 2010), pp. 95133.

56 Clarke, “The execution of civil judgments in China,” pp. 65–81; Peerenboom Randall, China's Long March toward Rule of Law (Cambridge: Cambridge University Press, 2002), pp. 450512; Dam Kenneth, The Law-Growth Nexus (Washington, DC: Brookings Institution, 2006); Trebilcock and Leng, “The role of formal contract law and enforcement in economic development,” pp. 1517–80; Xin He, “Enforcing commercial judgments,” pp. 419–57.

* The author acknowledges the Financial support of a GRF grant from the Hong Kong government (no. 9041402 (CityU142708)). Professor Wei Ding, School of Law, Xi’an University of Communications, provided indispensable support for the fieldwork.

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