Fierce competition in the domestic market is forcing Chinese companies to extend longer credit lines to buyers in order to protect market share, exposing companies to greater credit risk and even defaults, according to a survey by Coface. Coface, a credit insurance and credit management services company, surveyed 966 private and state-owned companies between October and December 2009. The results show that Chinese companies are facing longer overdue payments, with 24 per cent saying that their payments were overdue by over 12 months, twice the amount in 2008. Fifty-five per cent of them said their payments were overdue by more than 60 days. 'These results could signal a higher probability of defaults or even bad debts among companies in China if the market situation remains uncertain,' said Richard Burton, the company's managing director for Greater China. Xavier Farcot, the deputy managing director for Greater China, said the findings highlight a problem with the payment culture on the mainland, and show a deteriorating payment behaviour despite the government's stimulus package. Sixty per cent of respondents said the main reason for default payments was financial difficulties faced by buyers, with half of those citing fierce competition as the root cause of buyers' financial concerns. Eighty per cent of companies said they offered credit sales, up from 65 per cent the year before. Coface said companies are in a 'trading dilemma' as they must put up with the risk of default payments in order to secure their market share and protect customer relationships. Companies are 'taking defensive positions rather than aggressively expanding to new markets' as demand from industrialised export markets have not fully recovered, Farcot said, and intense domestic competition puts pressure on pricing and profit margins. Some of the sectors that benefited most are those that are most at risk of overdue payments, according to the survey, in particular household electrical appliances, construction, industrial machinery and metals. Farcot said some buyers may be ordering more goods than they believe they can shift as they want to ensure there are 'enough goods on the shelf' to grab market share, as well as to take advantage of credit lines from suppliers rather than paying interest for credit from banks.