Mid-market companies often discover that a China-relatedproblem becomes urgent only after money, tooling, inventory, or customer commitments are already at risk. The practical steps below are intended to help management identify the right counterparty, preserve leverage, and decide when local counsel or other specialists should become involved.

The answer depends on ownership and contract rights

A factory may believe it is free to use general know-how,excess capacity, or designs it helped develop. The buyer needs contractual and IP rights that clearly restrict unauthorized production and sales.

Separate pre-existing know-how from product-specific materials

Define confidential information, product designs, molds,software, specifications, and improvements. Clarify what belongs to each party and what may not be used for third parties.

Control overruns and subcontracting

The agreement should prohibit excess production,unauthorized sales, use of rejected goods, and subcontracting without approval. Require destruction or controlled disposal where appropriate.

Register IP in China where relevant

Contract rights alone may not stop trademark registration,counterfeiting, or use by third parties. Consider Chinese trademark, patent, and copyright protections before disclosing valuable assets.

Plan enforcement evidence

Monitor marketplaces, preserve samples and listings,document factory links, and avoid tipping off the supplier before evidence is secured. Chinese counsel can evaluate administrative, civil, customs, or
platform remedies.

Practical next step

Before sending additional money or escalating the dispute, assemble the Chinese business license, contract, purchase orders, invoices, bank details, payment records, and key communications. A focused review can identify the correct entity, the immediate leverage points, and whether a legal demand, local
verification, negotiation, or litigation assessment is justified.