If The Economy Is Really Good Why Overdue Payments Soaring In China

 Back in 1998 before the Asian financial crisis broke, my old business was turning down many contracts offered to us. It is not because I already "gone up the beach". During those period, I was already hearing a lot of "horror stories" that contractors and suppliers cannot get their payments and their big business debtor companies would forced down their throat with their unsold properties or just plainly play the "wait, the boss is not around to sign the cheque" game. I think China is currently displaying similar symptoms :-

Oddly, many of the same Chinese industries benefiting most from Chinese government stimulus are also experiencing extremely long overdue payments, according to a survey of 966 companies by Coface.

The survey covered the fourth quarter of 2009 and found transportation, construction, industrial machinery, agriculture, steel & metals, and electrical appliances to be the top six stimulus winners.

China Daily:

Yet these sectors, with the exceptions of agriculture and transportation, also include the highest numbers of companies reporting long overdue payments accounting for over 2 percent of total sales.

"Generally, more than 2 percent of total sales overdue is regarded as a dangerous level, whilst a payment that is overdue for over 12 months has a high probability of becoming a bad debt," said Richard Burton, regional managing director of Coface in China.

"The survey results reflect the fact that overdue payments remain a key concern among companies in China, even though their sales or profits may have been improved by the stimulus," he added.

The survey also reveals that companies in China face overdue payments with more average days overdue and greater weight in total domestic sales than in 2008. The number of respondents experiencing payments overdue for over 60 days has increased by 55 percent.

Meanwhile, 55 percent of respondents reported that payments of more than 2 percent of their domestic sales were overdue for six to 12 months, while about 24 percent reported such payments being overdue for more than 12 months - twice as many as in 2008.

V. Fernando

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