Payment default rates among mainland exporters overtook those of Hong Kong companies in the first half, according to French export insurer Coface. In a survey by Coface of 3,059 Hong Kong companies from January to June, payment defaults by mainland enterprises rose to 1.6 per cent of total payments, up from 1.32 per cent in the previous half. By comparison, payment defaults by Hong Kong buyers improved from 1.52 per cent to 1.44 per cent during the same period. Xavier Farcot, Coface's deputy regional managing director for Greater China, said the result was further proof that mainland enterprises were experiencing the spreading impact of the worldwide credit crisis. 'We anticipate that the payment performance of China buyers may further worsen in the coming quarter,' Mr Farcot said. 'However, as the Chinese government recently indicated, it may introduce policies to ease the difficulties faced by SMEs in China. There may be a gradual improvement later in the year.' Respondents with late payments from buyers on the mainland rose to 9.41 per cent from 8.37 per cent in the previous half, surpassing late payments by customers in Hong Kong of 9.25 per cent from 9.44 per cent during the period. Customers who are unable to pay for their goods on time are referred to as late payments. Payments that cannot be recovered go into default. Academics said the growing importance of mainland buyers to Hong Kong and yuan appreciation contributed to the rise in delinquencies from mainland enterprises in the first half. 'The yuan appreciation has prompted mainland buyers to delay payments,' said Raymond So Wai-man, a finance professor at Chinese University of Hong Kong. 'They can pay less in Hong Kong dollars as the yuan strengthens.' To curb inflation and trim a record trade surplus, Beijing allowed the yuan to rise faster in the first half of this year. The currency strengthened 6.6 per cent against the US dollar and the Hong Kong dollar in the first half, following a 6.9 per cent advance for the whole year of last year. Mr So said macroeconomic uncertainty on the mainland would continue to weigh on payment performance, but a slower yuan appreciation would improve the situation. The yuan fell 0.05 per cent last month, the first monthly decline since May 2006, and closed at 6.8365 per US dollar yesterday. In response to the rising credit risk, 33.6 per cent of survey respondents have already tightened credit terms granted to their customers in the past six months and 8 per cent indicated that they had plans to tighten credit terms in the near future.
