Where a supply or manufacturing contract with a Mainland China party stands now

For any international group sourcing from the Mainland, the contract sitting in the file drawer is also a risk instrument. A supply or manufacturing agreement that looked solid when signed can develop stress fractures the moment a dispute arises, a counterparty shifts strategy, or a cross-border enforcement question moves from theoretical to immediate. The governing-law and forum clause – the two provisions most commonly left to boilerplate – are exactly where that stress concentrates.

A supply or manufacturing contract with a Mainland China party engages two distinct legal systems: the law governing the substantive rights under the contract, which may be the law of the People's Republic of China, Hong Kong law, or a third-country law, and the mechanism for resolving disputes, which since 29 January 2024 sits within a significantly reformed Mainland–Hong Kong cross-border recognition and enforcement regime under the Mainland Judgments in Civil and Commercial Matters (Reciprocal Enforcement) Ordinance (Cap. 645). Choosing the wrong combination of governing law and forum at the outset, or failing to review an existing agreement against the new regime, is the most common and most avoidable source of enforcement failure our desk sees.

This analysis covers the commercial stakes, the governing instruments, the cross-border interface between Hong Kong and Mainland China, and our read on where the risk sits for international parties today.

What is actually at stake when a supply contract crosses the boundary

The commercial question is straightforward: if the Mainland party fails to perform, where do you go and what can you recover? The legal answer is less obvious than most international procurement teams expect.

Supply and manufacturing contracts with Mainland parties tend to generate disputes in clusters: delayed shipment, defective goods, unilateral price revision, sudden termination, and non-payment of deposits or advance consideration. None of these is unusual. What is unusual about Mainland-connected disputes is the gap between the paper rights and the enforcement reality.

A foreign buyer may hold a contract governed by English law or Hong Kong law, with an arbitration clause in favour of a neutral seat. That choice was deliberate and defensible when the contract was signed. The buyer's problem emerges when the assets – inventory at the factory, a receivable owed by a third buyer, the Mainland counterparty's bank accounts – are located entirely within the People's Republic of China. Enforcement then requires engaging the Mainland courts or a Mainland tribunal, and the efficiency of that engagement turns entirely on how the original contract was structured.

In our cross-border practice, we see two recurring failure patterns. First, international parties apply their standard procurement template – drafted for European or US counterparties – to a Mainland manufacturing relationship without adapting the forum clause. The result is a foreign-court judgment that is difficult to convert into Mainland enforcement. Second, parties draft an elaborate dispute-resolution clause but neglect the day-two operating reality: what happens to existing purchase orders, tooling, moulds, and in-transit goods the moment a formal dispute is declared.

Getting the structure right at the outset is a fraction of the cost of repairing it once a dispute has crystallised.

Which governing instruments control this cross-border relationship?

The contract between an international party and a Mainland manufacturer sits at the intersection of several bodies of law, each with its own scope and hierarchy.

On the Mainland side, the Civil Code of the People's Republic of China – which replaced a cluster of earlier statutes including the Contract Law – governs contract formation, performance, breach, and remedies for contracts subject to Mainland law. For international contracts, Mainland conflicts-of-law rules generally permit party autonomy in choice of governing law, but that autonomy is not unlimited: certain mandatory rules of Mainland law apply regardless of the chosen law, particularly in relation to Mainland-situated assets, intellectual property, and regulatory matters.

On the Hong Kong side, where Hong Kong law governs or where Hong Kong is chosen as the seat of arbitration, the Arbitration Ordinance (Cap. 609) provides the statutory foundation. The Arbitration Ordinance is modelled on the UNCITRAL Model Law, and Hong Kong is a seat with a well-developed common-law arbitral jurisprudence. The HKIAC Administered Arbitration Rules (currently the 2024 Rules, effective 1 June 2024) apply where the parties have agreed to HKIAC arbitration.

The critical cross-border instrument is Cap. 645 – the Mainland Judgments in Civil and Commercial Matters (Reciprocal Enforcement) Ordinance – which came into force on 29 January 2024. It replaced the earlier 2008 choice-of-court regime and removed the requirement for an exclusive-jurisdiction agreement. Under Cap. 645, effective Mainland civil and commercial judgments, including monetary judgments and certain non-monetary orders, may be registered with the Court of First Instance in Hong Kong and enforced as Hong Kong judgments. The reverse pathway – converting a Hong Kong judgment for use in Mainland courts – is effected through a certified copy and certificate mechanism on the Mainland side.

The exclusions under Cap. 645 matter for supply-contract practitioners. Certain insolvency-related orders, some intellectual-property matters, and arbitration-related awards fall outside its scope. Awards from Hong Kong-seated arbitration in Mainland-party disputes continue to run via the 1999 Arrangement and the 2020 Supplemental Arrangement, not Cap. 645. Simultaneous enforcement applications in both jurisdictions have been permissible since the 2021 amendment to that Arrangement.

Understanding which instrument applies to which type of outcome – a court judgment versus an arbitral award, a monetary order versus a specific-performance order – is the threshold question for any cross-border supply dispute.

For a structured read of how these instruments interact in your specific fact pattern, contact our corporate counsel desk at Lockhart & Yip's Corporate Counsel practice.

The sequence above describes the standard position. Your matter turns on the documents, the jurisdictions actually engaged, and the order of steps – which is where the route is won or lost. To discuss how these instruments apply to your cross-border position, contact info@lockhartyip.com.

How does the cross-border interface actually bite in a supply contract?

The interface between Hong Kong law and Mainland law is not a clean divide. It is a sequence of decision points that operates differently depending on which direction enforcement is running and what type of obligation is in dispute.

Consider the standard scenario: a European principal uses a Hong Kong special-purpose vehicle to hold the manufacturing relationship with a Mainland factory. The contract is between the Hong Kong entity and the Mainland enterprise. The governing law is Hong Kong law; the forum clause selects HKIAC arbitration in Hong Kong.

If the Mainland factory delivers defective goods and the Hong Kong party obtains an HKIAC award, the enforcement path into the Mainland runs through the Arrangement for Mutual Enforcement of Arbitral Awards between the Mainland and the HKSAR – not through Cap. 645 (which applies to court judgments, not arbitral awards). The Mainland courts have jurisdiction to recognise and enforce the award. The process involves filing an application with the competent people's court in the Mainland, supported by the award, the arbitration agreement, and relevant translations. The timeline and the receptiveness of the competent court vary by location and the complexity of the matter.

Now consider the reverse scenario: the Mainland manufacturer holds a valid counterclaim for unpaid invoices and obtains a judgment from a Mainland people's court. Under Cap. 645, that judgment may now be registered with the Court of First Instance in Hong Kong without the need for a fresh action on the judgment – a material improvement over the prior regime. The Hong Kong entity's assets, including bank accounts and receivables, become reachable.

What changes this calculus? Three things. First, the nature of the obligation – a monetary award versus a specific-performance order. Second, the location of the assets against which enforcement is sought. Third, whether interim measures have been sought and in which jurisdiction. Under the Interim-Measures Arrangement between the Mainland and the HKSAR, which has been in effect since 1 October 2019, parties to Hong Kong-seated arbitrations may seek interim relief from Mainland courts before or during the arbitration. This is a significant practical tool for protecting supply-chain assets – including inventory, tooling, and intellectual-property records held on the Mainland – while the arbitration is in progress.

What foreign counsel often misread is the practical weight of the interim-measures route. An international client who waits until an award is obtained before thinking about Mainland asset preservation may find that the relevant assets have been moved, encumbered, or transferred. The interim-measures step is not a procedural luxury; it is often the determinative action in a Mainland-facing supply dispute.

The governing-law and forum clause: a comparative read

The choice of governing law and the choice of dispute-resolution forum are related but distinct decisions. International parties habitually bundle them together – "Hong Kong law, HKIAC arbitration" – without working through the consequences of each independently in a Mainland-facing context.

Governing law determines the substantive content of the parties' obligations: what constitutes breach, what remedies are available, how damages are assessed, whether a force-majeure clause operates in the way the drafting party expected. Hong Kong law is a mature common-law system with a settled body of commercial contract doctrine. Mainland law, applied through the Civil Code, takes a different approach to several issues that arise frequently in supply contracts: the calculation of damages, the scope of implied terms, and the availability of specific performance as a default remedy rather than a last resort.

Where Hong Kong law governs, a Mainland court asked to enforce a Hong Kong-law contract must apply Hong Kong law to the substantive dispute – a task that adds complexity and expert-evidence costs on both sides. Where Mainland law governs, a Hong Kong arbitral tribunal is in the same position. Neither outcome is unworkable, but neither is free.

Forum selection in the context of a Mainland manufacturing relationship carries a further layer: the enforceability of the award or judgment in the jurisdiction where the responding party's assets sit. An LCIA London award against a Mainland party requires recognition through a different pathway than an HKIAC Hong Kong award. The New York Convention applies to Hong Kong directly; PRC and Hong Kong awards run via the bilateral Arrangements. London awards against Mainland parties depend on China's reservation position under the New York Convention and on the relevant people's court. This is a live enforcement-risk variable, not a theoretical one.

Our desk regularly advises on the following comparative positions:

• Hong Kong law / HKIAC arbitration: strong doctrine, direct access to the Interim-Measures Arrangement, enforcement via the Arrangements rather than the New York Convention for Mainland-seated assets.
• Mainland law / China International Economic and Trade Arbitration Commission (CIETAC) arbitration in Beijing or Shanghai: familiar to Mainland counterparties, but the forum requires careful review of the specific rules and the competent-court map for enforcement.
• Third-country law / third-country seat: creates an additional recognition step in both directions and is generally not the preferred option for a contract whose primary asset base and performance obligations are Mainland-situated.

The practical read: for a supply or manufacturing contract where the principal enforcement risk runs from the international buyer against the Mainland manufacturer, and where the Mainland party's assets are the primary recovery target, Hong Kong law with HKIAC arbitration in Hong Kong is currently the best-tested option for preserving access to the Interim-Measures Arrangement and the Arrangements for mutual enforcement of awards. For contracts where the Mainland party is the claimant-in-waiting – for example, a long-term supply agreement where the international buyer carries the payment-default risk – a Mainland-side arbitral forum may better reflect the practical enforcement geometry.

The choice is not ideological. It is functional.

If an earlier filing, structure or enforcement attempt produced an adverse or stalled result, a second read can identify the strategic error and the routes still open. Write to info@lockhartyip.com.

Micro-scenarios: where the structure held and where it did not

Two anonymised matters from our cross-border practice illustrate the difference between a structure that works and one that does not.

In the first, a European consumer-goods group sourcing through a Hong Kong subsidiary from a Guangdong manufacturer came to us in late 2025 after receiving defective goods across a twelve-month purchase cycle. The contract had been drafted on a European template adapted for Asia, with an ICC Paris arbitration clause and English law as the governing law. When the matter escalated, the ICC pathway produced an award. The enforcement problem was immediate: the Mainland manufacturer held no assets outside the PRC, the ICC award required recognition through China's New York Convention procedures, and the competent court declined to register it on a technical ground relating to the scope of the arbitration clause. We were engaged to assess the residual routes. The matter required a collateral action in Hong Kong against a related entity with Hong Kong-registered assets, with a substantially longer timeline than a direct enforcement would have required. The lesson: the forum clause had been chosen for European familiarity, not for Mainland-asset enforcement geometry.

In the second, a mid-market Taiwanese technology group had entered a manufacturing agreement with a Jiangsu counterparty, with Hong Kong law and HKIAC arbitration in Hong Kong. When the Mainland party stopped performing and moved tooling off-site, the Taiwanese group engaged us at the arbitration-commencing stage. We applied for interim measures from the Mainland court under the 1 October 2019 Arrangement before the tribunal was constituted. The interim order was granted within the Arrangement's target window; the tooling was preserved. The arbitration proceeded on the merits and produced an award. The enforcement application in the Mainland ran via the Supplemental Arrangement. The outcome – qualitatively – was significantly better than it would have been had the interim-measures step been deferred until after the award.

The variable in both scenarios was not the substantive merits. It was the structure chosen before the dispute arose.

Where the risk sits now: our analytical read

The position as at late 2027 reflects two concurrent developments that supply-contract practitioners should be tracking.

First, Cap. 645 has now been in operation for nearly four years. The initial period of practical uncertainty about how the Court of First Instance would handle the registration mechanism, and how Mainland courts would receive Hong Kong judgment certificates, has given way to a more settled body of experience. The regime works – for judgments within its scope. Its limitations are real: the exclusions remain significant, and the connection test that replaced the old exclusive-jurisdiction requirement still requires careful analysis. But for international parties who have structured their Hong Kong entity correctly and whose contractual dispute falls within the monetary-judgment category, the enforcement route is now better-charted than it was before 2024.

Second, the pattern of supply-chain disputes has shifted. Geopolitical tension, supply-chain diversification, and the increasing use of dual-source procurement strategies have produced a category of dispute that did not feature prominently ten years ago: contracts terminated by Mainland parties on regulatory or policy grounds, often with little notice, and often in circumstances where the foreign party's primary legal exposure is to its own supply-chain commitments to downstream buyers rather than to the direct loss from the Mainland manufacturer's breach. These disputes are more complex than a straightforward defective-goods claim. They require analysis of force-majeure doctrine, regulatory-change clauses, and the allocation of regulatory risk under both the contract and the applicable governing law.

What does this mean in practice? It means that the standard review of a supply or manufacturing contract with a Mainland party – checking the governing-law clause, the forum clause, and the payment mechanism – is necessary but no longer sufficient. The contract now needs to be read against the current enforcement regime, the interim-measures architecture, and the regulatory-risk allocation provisions, in that order.

International counsel who have not revisited Mainland supply contracts since before 29 January 2024 should treat that date as a reset point. The Cap. 645 regime changed the enforcement geometry for judgment-based claims. Contracts structured before that date may be sub-optimal for the current enforcement environment. Reviewing and, where necessary, renegotiating the dispute-resolution clause in a long-term supply agreement is a routine step in good contract management – and far less expensive than discovering the gap during a live dispute.

For a wider view of how corporate restructuring across jurisdictions interacts with this analysis, see our analysis on corporate restructuring across Hong Kong and Singapore. For supply-chain contracting involving CIS-region parties, our CIS supply contract briefing covers the parallel cross-border questions.

Decision matrix: structuring the governing-law and forum choice for a Mainland supply contract

The right combination of governing law and forum is a function of where the assets sit, who is more likely to be the claimant, and which enforcement route matters more.

Situation A: the international buyer is the primary enforcement risk-taker; the Mainland manufacturer holds all productive assets in the PRC; the contract involves bespoke tooling or moulds. Instrument: HKIAC arbitration with Hong Kong seat. Route: Interim-Measures Arrangement for in-arbitration preservation; Supplemental Arrangement for award enforcement. Timing: interim order may be sought before tribunal constitution. Risk: Mainland-court receptiveness to interim applications varies by location; the competent-court map should be verified before filing.

Situation B: the Mainland manufacturer carries payment-collection risk; the international buyer holds assets in multiple non-Mainland jurisdictions. Instrument: CIETAC or other Mainland-seated arbitration, or HKIAC with Hong Kong seat depending on the buyer's jurisdictional profile. Route: New York Convention for non-Mainland assets; the Arrangements for any Hong Kong-situated assets. Timing: shorter enforcement window in some jurisdictions. Risk: the choice of Mainland-seated arbitration reduces the availability of the Interim-Measures Arrangement as currently structured.

Situation C: a long-term supply agreement with force-majeure and regulatory-risk exposure; both parties have assets in multiple jurisdictions. Instrument: HKIAC with Hong Kong seat, Hong Kong or English law as governing law, specialist regulatory-risk allocation clause. Route: arbitration for substantive disputes; interim measures for asset preservation; Cap. 645 for any ancillary judgment-based claims. Timing: regular contract review cycle aligned to regulatory developments. Risk: force-majeure and regulatory-change clauses require drafting calibrated to both the Civil Code (for Mainland-law arguments) and the governing-law doctrine.

Situation D: the contract has already been signed with a sub-optimal forum clause; no dispute has yet arisen. Instrument: renegotiation or supplemental agreement. Route: agree an amendment to the dispute-resolution clause; update the governing-law provision if the original choice was driven by template rather than analysis. Timing: the window for renegotiation closes when the counterparty has an interest in the existing clause. Risk: delay.

The objection-handler: what international parties commonly get wrong

Several myths circulate among international procurement and legal teams when dealing with Mainland supply contracts. Three recur in our practice.

Myth one: a foreign-court or foreign-arbitral judgment is automatically enforceable in the Mainland via the New York Convention. This is only partially true, and the partial truth conceals the gap. The New York Convention applies in China, but with a reciprocity reservation and with procedural requirements that have produced inconsistent results across different people's courts. Hong Kong-seated awards benefit from the bilateral Arrangements, which provide a more direct and tested route. Non-Hong Kong awards – London, Singapore, Stockholm – face a longer and less predictable path. The Convention is not a guarantee of enforcement.

Myth two: choosing Mainland law as the governing law is inherently disadvantageous for a foreign party. This is not the current position. The Civil Code provides a sophisticated and commercially developed set of contract rules. Its doctrine on damages is different from English law, not inferior to it. The practical question is not which system is better in the abstract but which system is better for the specific dispute profile – and, critically, which system the Mainland court will have less difficulty applying if the enforcement question eventually lands there.

Myth three: the new Cap. 645 regime makes the enforcement question simple. It does not. Cap. 645 is a substantial improvement over the prior 2008 regime. But its exclusions are real, its connection test requires analysis, and its practical operation over four years has produced a body of experience that must be engaged, not assumed. Parties who rely on boilerplate assurances that the new regime "solves" enforcement risk without reviewing their specific contract structure and judgment type are likely to encounter the same surprise they would have faced before 2024 – only in a different section of the exclusions list.

Self-assessment: is your Mainland supply contract fit for the current environment?

The following checklist is not exhaustive, but it identifies the threshold questions any cross-border corporate counsel team should be able to answer about each active Mainland supply or manufacturing agreement.

• Does the governing-law clause reflect a deliberate choice made in light of the Mainland enforcement route, or was it carried over from a template?
• Is the dispute-resolution clause – arbitration or litigation – consistent with the governing-law choice, and does it designate a seat and institution without ambiguity?
• If the clause selects Hong Kong as the seat, has the interim-measures route to the Mainland courts been identified and documented in the client's dispute-response protocol?
• If the clause selects a non-Hong Kong, non-Mainland seat, has the New York Convention enforcement path to Mainland assets been assessed and accepted as a known risk?
• Has the contract been reviewed against Cap. 645 to determine whether any judgment likely to arise from this contract falls within or outside the regime's scope?
• Does the contract address day-two operating realities: inventory, tooling, moulds, intellectual-property records, and in-transit goods – including who holds them and what rights attach on termination?
• Does the force-majeure and regulatory-change clause reflect current drafting practice for Mainland-counterparty exposure, including allocation of regulatory-change risk?
• Has the contract been reviewed since 29 January 2024?

If the answer to any of these questions is no, or uncertain, the contract carries an unquantified but real cross-border enforcement risk. Addressing it before a dispute arises is the correct professional and commercial response.

Related practices

• Disputes & Arbitration – cross-border enforcement, arbitral-award recognition, interim measures
• Holding Structures – structuring the entity above the Mainland operating relationship

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Related

• Corporate Counsel
• Corporate Restructuring Across Hong Kong Singapore Singapore Analysis
• Supply Or Manufacturing Contract Cis Party Cis Briefing

This publication is general information and does not constitute legal advice. For advice on your situation, contact info@lockhartyip.com.