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China’s business woes worsen as overdue payments mount and get passed down supply chain

  • Chinese exports in ‘grave situation’ with dwindling cash flow weighing on bottom line, insider warns
  • Survey shows construction companies hit hardest, as well as firms that depend mostly on domestic demand, which has fallen amid coronavirus lockdowns

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More than a third of Chinese firms are struggling to collect overdue payments amid the difficult economic environment on the mainland. Photo: Shutterstock

In the face of a bleak outlook on economic growth amid strict coronavirus controls, Chinese companies are being increasingly challenged by tighter cash flows and longer delays in receiving payments, according to business insiders and a recent survey.

“Tight cash flow and massive payment delays have become a universal problem in the textile industry,” said Yun Hai, CEO of Guangzhou Jianpai SCM Tech, a consulting company in the garment supply chain.

“The capacity of foreign competitors has recovered, while geopolitical tensions and Covid outbreaks have put Chinese exporters in a grave situation. Cash flow is tight, adding another layer of pressure to corporate fiscal management.”

Coface, a global trade credit insurance group, said on Wednesday in its latest China Corporate Payment Survey on 1,000 Chinese companies that more companies saw payment delays last year, with the proportion rising to 42 per cent from 36 per cent in 2020.

“This was particularly the case for companies that depended mostly on the domestic market for sales, with anecdotal evidence – of weak local economic situations linked to the pandemic, as well as customers’ tight liquidity conditions – highlighted as reasons for an increase in overdue payments,” it said.

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