A survey conducted by the credit risk insurer Coface on payment behavior in China in 2022 showed that the number of companies that experienced payment delays in 2021 has decreased.
But the companies that made the payments have reported longer delays than in the previous year.
The average payment delay increased from 79 days in 2020 to 86 days in 2021.
Companies in 9 of the 13 sectors analyzed have reported an increase in payment delays, led by the agri-food sector, which recorded an increase of 43 days, followed by wood, transport and textiles.
The French credit risk insurer has detected an increase in the number of companies with very long delays in payments (more than six months), going from 15 to 19% in 2021.
Furthermore, what is of greatest concern is the significant increase in those companies whose very long delays exceed 10% of their annual turnover, jumping from 27% in 2020 to 40% in 2021, particularly in the construction and agrifood.
With China’s economic growth expected to slow in 2022, fewer companies are expecting an improvement in sales and cash flow.
Coface expects Chinese GDP growth to slow to 4.8% in 2022, after 8.1% in 2021.
This is a consequence of the significant obstacles that the Chinese economy continues to face, such as the slowdown in the real estate sector, the application of “zero COVID” policies, the timid recovery in consumption and the increase in the prices of raw materials.
Bernard Aw, Asia-Pacific Economist at Coface, said: “Coface’s latest Corporate Payments Survey has shown that credit terms offered by Chinese companies remained tight despite the recovery of the country’s economy. in 2021, as companies remained cautious due to the pandemic.”
The agri-food and energy sectors were the ones that reduced the terms the most (-23 days each), reflecting the increase in credit risks related to the increase in the prices of raw materials.
Although the number of companies reporting payment delays has decreased, the proportion of respondents who experienced an increase in payment delays has increased, from 36% in 2020 to 42% in 2021, the highest since 2016.
The agri-food sector saw the largest increase in average average payment delays (43 days) to 88 days.
Upward trends have also been recorded in the wood sector (+20 days), transport (+18) and textiles (+16), highlighting the impact of the slowdown in domestic demand due to strict social distancing restrictions in China.
Chinese companies are less optimistic about the country’s economic outlook, with 44% of respondents expecting sales to improve this year, down from 65% in 2020, while those forecasting better cash flow fell almost to the half, from 50% in 2020 to 27% in 2021.