In 1995, to ban and punish improper debt collection activities, the Chinese government issued an administrative regulation of “Notice on Prohibition of Establishing Debt Collections Companies.”  In 2000, another rule of “Notice on Revocation of Various Kinds of Debt Collection Companies and Attack on Illegal Debt Collections Activities” was released.
According to the above regulations, it is prohibited for any enterprises or individuals to set up debt collection companies in any form and to engage in debt recovery business.  In other words, debt collection activity in China is prohibited except law firms.
So far, “debt collection activities” still do not come within the business scope which would  be permitted or registered by the Administration of Industry & Commerce (AIC). However, there exsist lots of companies or individuals rendering such services in practice; and a company, which carries  out debt collection activities are usually in the name of “consulting ” or “credit management ”.  
Attention please ,Chinese creditors have a  different attitude to overdue receivables from their Western Counterparts. In China overdue debt is usually handled by negotiation rather than by such forms of intense credit control pressure as phone calls, threatening correspondences, lawyers demand letters etc. 
Legal and Judicial System The PRC’s legal system is broadly divided into three levels:
1.    The central government level;
2.    Provincial  government level, and
3.    Local municipal or county government level.
There is a hierarchy within the court structure from the top down:
1.    The Supreme People’s Courts,
2.    The Higher People’s Courts,
3.    The Intermediate People’s Courts, and
4.    The Basic(county) People’s Courts.
The People’s Courts represent the trial organ of the state.
There are more than 3,000 basic courts at county level, which  further supervise about 20,000 smaller units referred to as people’s tribunals (at town level). There are 376 Intermediate People’s Courts and 31 Higher People’s Courts located in the provinces.
A judgment granted by a first instance court can, as of right, be appealed to an appellate court whose ruling is final. Under certain exceptional circumstances, e.g., when there arises a serious misapplication of law, a serious procedural irregularity or when new evidence comes to light, etc., the ruling of the appellate court can further be reviewed.
Litigants are generally limited to one appeal, on the theory of finality of judgment by two trials. Cases of second instances are often reviewed de novo as to both law and facts.  Judgment at second instance is final, which means that a case is only heard twice by two levels of courts and the last court decision will be rendered final and binding.
International Treaties
Limitation of action In general, the limitation of action regarding applications to a People’s Court for protection of civil right  is two years and for  international business is four years. This means after the stipulated period (counting from the last demand date but not the original due date), the creditor cannot file a claim under the jurisdiction system but only can use other methods to collect their debts. 
Dispute Resolution Civil or commercial disputes in China can also be resolved through other alternative dispute resolution processes such as arbitration or mediation.
Civil and commercial disputes are traditionally resolved by litigation in the PRC Courts. An Intermediate People’s Court deals with a considerable number of disputes usually over RMB 2 million  at first instance. A Higher People’s Court whose jurisdiction varies from province to province and municipality to municipality deals with large claims at first instance.
Arbitration System Arbitration bodies are set up in China at the national and local levels. The China International Economic and Trade Arbitration Commission (CIETAC) is the arbitration agency in China that handles international economic and trade disputes. It is headquartered in Beijing and has branch offices in Shenzhen, Shanghai and Chongqing. In addition, local arbitration bodies such as the Beijing Arbitration Commission and the Shanghai Arbitration Commission arbitrate domestic and foreign-related cases.
Arbitration rulings in China are “One Instance Being Final”, which means that the ruling takes effect immediately upon pronunciation. Even if the parties are not happy with the ruling, they cannot file a suit to the court for the same dispute or apply for arbitration or reconsideration to arbitration organizations. Instead, they should automatically implement the ruling; otherwise the other party has the right to apply to the court for enforcement.
However, parties may apply to the court for a review and verification of the case and annulment of the arbitration ruling if they believe it is indeed wrong and conditions for a legal revocation have been met. 
Mediation System There are currently four types of mediation practices in China:
1.    Civil mediation: Mediation by People's Mediation Committees outside the court.
2.    Judicial mediation: Mediation by a court of law in civil and economic disputes and minor criminal cases inside the court. Mediation is not a necessary procedure. A court's mediation document is as valid as its verdict.
3.    Administrative mediation: This can be outside-the-court mediation by grassroots governments such as a township government in ordinary civil disputes, or outside-the-court mediation by government departments in compliance with legal provisions in specific civil disputes, economic disputes or labour disputes
4.    Arbitration mediation:Mediation by arbitration bodies in arbitration cases. Arbitration is called upon only if mediation fails to resolve the differences. This is also an outside-the-court mediation.
Article 91 of the Civil Procedure Law provides that a court of law should adjudicate in a timely fashion if mediation fails to produce an agreement or if one party retracts before the mediation document arrives.