Payment practices report

June 2020

The Atradius Payment Practices Barometer is an annual survey that assesses business payment behaviour throughout the world. The survey explores a range of topics including payment terms, payment delays, credit sales, and DSO (Days Sales Outstanding), results of which provide a good indication of outlook for businesses in China.

Hong Lin,

Country Manager for China commented on the report

China’s domestic economy has already shown concrete signs of recovery from the downward impact of the pandemic. However, as a large number of China’s major trading partners are still coping with the unprecedented impact of pandemic-induced disruptions on their domestic economies, some uncertainty surrounding the economic growth outlook in China remains.

In this landscape, and as shown in our survey, trade credit is set to play a greater role in domestic B2B transactions in China. However, in the current challenging economic times, it is essential that businesses focus on strengthening their customer credit risk management and debt collection processes. In this respect, a strategic approach to credit management becomes essential to safeguard cash flow and ultimately business profitability.

Introduction

The survey questionnaire was completed by Chinese businesses during March 2020. By mid-March, for the first time, China reported no locally-transmitted cases of COVID-19, leaving behind a January-February nationwide shutdown aimed at containing the spread of the pandemic.

The impact that the virus had on China’s domestic economy and on its growth forecasts for this year are still to be fully assessed. However, most Chinese respondents believe that the economy will improve significantly over the next year.

Key takeaways from the report

Our survey shows an increase in the total value of B2B sales on credit offered by businesses in China and indicates that trade credit is set to play a greater role in domestic B2B trans- actions. This clear trend towards the use of trade credit contrasts sharply with previously observed payment practices in the country, which tended to favour cash payments. Interestingly a significant majority of respondents to our survey, well above average for Asia, reported that they request guarantees of payment when selling on credit.

What’s more, nearly everyone interviewed reported using one or more credit manage- ment tools to protect their accounts receivable.

This demonstrates a high level of financial sophistication among Chinese businesses of different sizes and across sec- tors that are actively seeking a competitive edge while promoting short-term financing options and protecting cash flow.

Download the report

If you have any questions about protecting your receivables send us a message so we can try and address your specific needs.

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