Many China firms have cash flow problem

 

  China’s firms facing longest payment delays among major Asian economies

    The average payment delay in China fell to 83 days last year, according to a Coface survey, but this was almost twice as long as Japan.

    The payment delay is higher than for firms in Australia, Hong Kong, Taiwan, Singapore and India, which could further exacerbate financial risks.

Chinese companies are faced with the longest payment delays among major Asian economies, according to a new report, a weakness that could be amplified amid the country’s slower-than-expected post-coronavirus recovery and may bring new threats to the national economy.

But this was almost twice as long as Japan, which reported the shortest payment delay, according to the results of the survey of 2,300 companies from nine markets and 13 sectors conducted between November and April.

The payment delay in China is also higher than 72 days for Australian firms, 63 days for Hong Kong companies, 62 days for Taiwan businesses and 56 days for both Singapore and India.
Most economies reported longer payment delays, albeit to various degrees Coface

“Most economies reported longer payment delays, albeit to various degrees,” said the report, which was released on Tuesday.

However, the report added, longer payment delays did not go hand in hand with an increase in firms with overdue payments as the proportion of respondents that experienced an increase in the value fell to 26.8 per cent in 2022 from 35.5 per cent a year earlier.

A long payment delay could affect the production and operation of enterprises, impact bank credit and lead to more firms being caught in debt situations they are unable to resolve, which could further exacerbate financial risks.

The main reason for payment delays was found to be customers’ financial difficulties, given fierce competition and higher raw material prices.

China firms plagued by payment delays, cash-flow risks, survey finds


China is considered the market where the risk of so-called ultra-long payment delays remains elevated compared to others, at 36.4 per cent, the survey said.

This is almost four times that of Japan and Singapore, where firms experienced the least chance of payments being overdue by more than six months exceeding 2 per cent of their annual turnover, according to Coface.

At a Politburo meeting in April, Beijing placed a focus on risks in key areas and to coordinate efforts to reform small- and medium-sized banks, insurance firms and trust institutions.

According to a research report released by the Bank of China on Monday, the global financial system will continue to face uncertainties in the third quarter, with credit and liquidity risks prominent.

The report said banks’ profitability had declined due to sluggish credit demand and a slowdown in asset expansion.

Chinese banks should take responsibility to proactively adapt to lower interest rates, increase asset support to the real economic sectors and strengthen their risk-coping capabilities, it suggested.

Private firms in China, after experiencing three years of zero-Covid measures, have a gloomy business outlook as economic data has failed to meet market expectations of a quick recovery after the reopening.

According to China’s National Bureau of Statistics, profits at industrial enterprises hit 2.67 trillion yuan (US$368 billion) in the first five months of the year, down by 18.8 per cent from the same period of last year.

Also in the first five months of the year, investment from the private sector – which accounts for over 55 per cent of the overall investment – declined by 0.1 per cent, in contrast to 4 per cent overall growth and a 8.4 per cent rise from state-owned enterprises.