New | Atradius worried over rising payment problems in China

Credit insurer Atradius warns of spiraling payment problems in China as trade data for January signals the sharpest slowdown in domestic demand in five years. A pile of unpaid bills would exacerbate reluctance among suppliers to ship goods to companies due to the risk of further running up bad debts.

Figures from China’s customs administration showed that imports in January declined by around 20 per cent from a year ago, while exports declined by 3 per cent year on year.

“The huge decrease in import figures in January is probably due to falling commodity prices. It is also showing, from my perspective, a slow down in domestic demand, which is a bit worrying while the government initiative is designed in increasing domestic consumption,” said Mathew Cockerill, country manager of Atradius in Hong Kong.

The impact of the weak domestic demand passed through the supply chain as poor sales led to a shortage of funds and a rise in overdue payments.

A survey on corporate payment practices conducted by Atradius showed that 67 per cent of respondents in mainland China reported late payments last year. The figure was much higher than the Asian average of 47 per cent, and jumped 8 percentage points from 59 per cent in 2012.

“When it starts getting over 60 per cent of people not paying their invoices on due date, it shows there’s actually quite a lot of financial stress running through the supply chain,” said Cockerill.