As China continues to grow as the world’s leading manufacturing hub, the number of Turkish companies engaging in sourcing, production, subcontracting, and machinery investments in China increases each year. However, one of the most critical factors when doing business in China is having a properly drafted contract.
Chinese law is significantly different from Turkish law, and poorly drafted contracts may result in:
•Low product quality
•Delayed deliveries
•Manufacturers avoiding responsibility
•Almost impossible legal recourse
In this article, we outline the essential clauses you must include when signing a contract with a Chinese manufacturer or supplier.
1. The Contract Must Be in Chinese (Bilingual: English + Chinese)
Chinese courts only recognize contracts prepared in Chinese.
Contracts written solely in English are legally weak.
The safest structure is:
✔ A bilingual contract (Chinese + English)
✔ A clause stating that the Chinese text prevails in case of dispute
2. Technical Drawings, Specifications, and Tolerances Must Be Attached to the Contract
In China, any technical detail not written in the contract is not legally binding.
The contract must include:
•Technical drawings (with revision dates)
•Tolerances and GD&T requirements
•Surface quality details (Ra, coating, paint, machining marks)
•Material standards (ASTM, EN, DIN)
•Heat treatment requirements
•Full process steps (welding, milling, CNC, coating, etc.)
3. Quality Control Clauses: FAI, PSI, FAT
These clauses must be explicitly stated:
•FAI (First Article Inspection)
•In-line QC – Right to inspect during production
•PSI (Pre-Shipment Inspection)
•FAT (Factory Acceptance Test) for machinery and production lines
Mandatory statements to include:
✔ “Mass production cannot begin without FAI approval.”
✔ “Products cannot be shipped without an approved PSI report.”
4. Product Labeling, Packaging, and Shipping Requirements
Incorrect packaging is one of the most common causes of damage in China.
The contract should specify:
•Shock-resistant packaging standards
•Moisture and corrosion protection
•ISPM-15 requirement for wooden crates
•Labeling on each box: product name, size, quantity, lot number
•Seller liability for damaged goods
5. Clear Payment Terms and Penalties
The safest payment methods in China:
•LC (Letter of Credit)
•T/T with low deposit + balance tied to delivery and inspection
The contract must clearly include:
✔ Late delivery penalties
✔ Mandatory re-production of non-conforming items
✔ All costs of defective production covered by the manufacturer
✔ Payments linked to QC approval
6. NDA and Protection of Technical Drawings
In China, sharing drawings with third parties is a frequent risk.
Therefore:
•NDA must be prepared in Chinese
•Drawings should include: “Confidential – Not to be reproduced”
•Subcontracting must be prohibited unless written approval is given
•Drawings accessible only to authorized personnel
7. Material Certificates, Tests, and Standards
Mandatory especially for precision components and defense-related projects:
•3.1 material certificate
•Chemical composition test
•Hardness test
•Tensile test
•NDT tests (UT, PT, MT, RT)
•Heat treatment certificate
If these are not written in the contract, the manufacturer may simply ignore them.
8. Delivery Times, Delay Penalties, and Logistics Plan
Delays are common in China.
The contract must clearly define:
•Exact production lead time
•Daily penalty for delays
•Refund or cancellation rights if delay exceeds 10 days
•Shipping terms (FOB, EXW, CIF)
9. Dispute Resolution and Applicable Jurisdiction (Most Important Clause)
If the “dispute resolution” clause is wrong, all rights can be lost.
Safest options:
1.CIETAC – China International Economic and Trade Arbitration Commission
2.Shanghai or Shenzhen courts
Incorrect options:
✘ Non-Chinese courts (China will not enforce them)
✘ “Parties may apply to their own courts” (legally invalid)
10. Manufacturer Information and Official Company Seal (公司公章)
For a contract to be valid in China, it must include:
•Full legal company name (in Chinese)
•Business registration number
•Legal address
•Legal representative’s name
•The company’s official red seal (company chop)
Without the company chop, the contract is not legally binding.
Conclusion
A well-drafted contract in China protects your quality, reduces production risks, and safeguards your company from serious financial loss.
The essentials of a strong China contract:
•Bilingual text (Chinese + English)
•Clear technical attachments
•FAI + PSI + FAT clauses
•Delay and quality penalties
•NDA and drawing protection
•Official company seal (chop)
•Correct court/arbitration selection