RISK MANAGEMENT

More Corporates in China Experience Long Payment Delays Despite Robust GDP Growth

The Chinese economy expanded 6.9% in 2017 and 6.8% in the first quarter of 2018, but more corporate finance departments are waiting longer compared with 2016 for customer payments – if they receive them at all.

The latest annual survey by credit insurance provider Coface finds that 26% of the 1,003 companies questioned experienced delays in payment exceeding 120 days, compared with 19% in 2016.

“More worryingly, those reporting that more than 10% of their annual turnover was tied up in ultra-long payment delays increased to 21% in 2017 from 11% in 2016,” Coface reports. In its experience, about 80% of such obligations don’t get paid at all.

Nearly half of the companies surveyed (47%) experienced ultra-long payment delays (exceeding 180 days) that equaled more than 2% of annual turnover, compared with 35% in 2016.

If those payments have to be written off, warns Coface, “a company’s cash flow could be at risk . . . even if the average length of its other overdue amounts is below 180 days.”

Companies in the energy, construction and automotive sectors are most at risk, with those in textiles and paper less so.

Companies with overdue payments of more than 180 days, per sector

Source: Coface

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