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05/23/2023
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China Payment Survey 2023: Shorter payment delays but worsening credit conditions in chemicals and wood

China Payment Survey 2023: Shorter payment delays but worsening credit conditions

The year 2022 was marked by a significant economic slowdown and stringent Covid response in China. In the face of tight liquidity and mobility restrictions that disrupted payment processes, Chinese businesses showed greater flexibility in giving credit terms. Coface’s 2023 China Corporate Payment Survey showed that the average payment terms increased from 77 days in 2021 to 81 days in 2022. 

Longer credit terms contributed to fewer incidents of payment delays in 2022. Among the 1,000 respondents, 40% reported overdue, down from 53% in 2021. This represented the smallest share over the past five years. The main reason for overdue was customers’ financial difficulties, which resulted from margin pressures due to competition and, increasingly, from rising raw materials prices. In addition, the average payment delay shortened from 86 to 83 days in 2022. Sectorwise, agri-food reported the largest reduction in the average payment delay with a cut of 23 days, as well as lengthening credit terms by the second largest period after textile.

Fewer respondents reported increased amount of overdue payments (42% to 21%). They were mainly small enterprises (<50 billion renminbi turnover) that relied on the domestic market. The survey, conducted between December 2022 and  March 2023, also showed that fewer companies faced ultra-long payment delays (ULPDs), which are payments overdue by more than six months, exceeding 2% of annual turnover. The proportion of respondents mentioning such delays fell from 64% in 2021 to 36% in 2022. With Coface’s experience showing that 80% of ULPDs are never paid, this drop suggests reduced cash flow risks. 

This risk, however, differed by sector. Chemicals appeared the most vulnerable to funding risks with just over a third (34%) of respondents reporting ULPDs exceeding 10% of turnover, up from 26% in 2021, as higher energy and raw material prices, production disruptions due to lockdowns, and subdued demand pressured the sector’s liquidity conditions. An upward trend was also observed for the wood sector, with the proportion increasing from 0% in 2021 to 20% in 2022.

The pandemic - and subsequent lockdowns - was the top factor affecting businesses in 2022. As the Chinese government turned away from its zero-Covid policy, the share of respondents expecting an improvement in sales and cash flow increased in tandem, indicating optimism about China’s business operating environment in 2023.

More details in our publication.

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HONG KONG S.A.R.

Leo CHAK
T. +852 2585 9188
leo.chak@coface.com
 
CHINA
 
Chloe CHENG
T. +86 21 6171 8100
chloe.cheng@coface.com
 
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Grazia LI
T. +886 2 8182 1015
grazia.li@coface.com 

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