Payment practices report

June 2021: Use of credit insurance on the rise

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

For the majority of the businesses we spoke to in China, trade credit was used as a sales tool to encourage repeat business with established customers and to attract prospects. As China grows its domestic market over the

coming months, it will be interesting to see how this may be reflected in percentage of businesses offering credit and, correspondingly, those who will proactively manage customer credit risk through the use of credit insurance.

Introduction

Compared to peers across Asia, more businesses in China anticipate using trade credit insurance over the coming months. This is likely to be a reflection of an increased appetite for trading on credit with B2B customers over the coming months.

The Atradius Payment Practices Barometer provides us with the

valuable opportunity to hear directly from businesses how they are coping with changed trading and economic circumstances caused by the pandemic. The survey questionnaire was completed by Chinese businesses during Q2 2021, a full year after the World Health Organisation declared Covid-19 a global pandemic.

Key takeaways from the report

Our survey highlights that the willingness of Chinese businesses to offer trade credit as part of their invoice payment terms is a reflection of sales strategies that actively seek to retain repeat business and attract new customers. The average invoice payment terms offered by the businesses we polled in China was 67 days, far longer than the 54-day average for Asia as a whole. Although liberal invoice payment terms may give businesses a competitive

edge, care should be taken to protect accounts receivable from this increased risk of late payments or bad debt. To help them keep DSO (Days Sales Outstanding) levels stable, over half of the Chinese businesses surveyed told us they plan to use credit insurance. This point to a strong focus towards enhanced credit management practices seeking to minimise trade credit risk, protect cash flow and profit, as well as create potential for business growth.

Key survey findings for China

  • Businesses polled in China transacted more than half of all B2B sales were on credit over the past year.
  • During the pandemic, credit management costs increased.
  • Payment terms offered by Chinese businesses are longer than Asia average, most often reflecting company standards.
  • Chinese businesses anticipate improvement in business performance due to domestic economic rebound over the coming months.
  • Use of trade credit insurance on the rise on the market.

Interested in getting to know more?

For a complete overview of the payment practices in China and in the local agri-food, chemicals/pharma and

ICT/electronics industries, please download the complete report.

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

Share this article