China a slow payer, say forwarders
FREIGHT forwarders doing business in China face growing problems collecting money from state-owned and joint-venture companies, according to an industry leader.
''It is a problem that could affect all freight forwarding companies in China,'' said Clause Czisla, marketing director of Asia Pacific for Kuhne and Nagel (KN).
''If we have not collected within 360 days, we have to write them off according to the company policy.'' He said while outstandings are still pursued, they are written off to reflect sound accounting, and ensure no doubtful receivables.
He said cargo on CIF (cost, insurance and freight paid by the shipper) terms accounts for only five per cent of KN's China business.
The ratio of CIF business differs for each firm, with mainland companies tending to have a higher ratio than international freight forwarders.
''Because of that, and the sometimes difficult situation on getting paid, local companies most probably are suffering more than international forwarding companies, which concentrate more on FOB (free on board) business,'' Mr Czisla said.
Vincent Intertrans Holdings managing director Norman Lok Kim-hung said the problem of payment delays did not apply to all Chinese companies.
However, he said his company has tight internal controls which allowed it to check client credit history.
Mr Lok said Vincent's outstandings debt is small, but companies have to be pushed hard for payments.
''It is different in China. If you have good connections they pay faster,'' he said.
Vincent, which is listed on the Hong Kong stock exchange, has 17 offices on the mainland and handles cargo for about 100 state-owned companies on a regular basis. This accounts for about half of its China business.
''If they don't pay us, we hold their cargo,'' said Vincent's financial controller Ken Chong.
He said half of the clients in China are reliable and punctual payers.
Vincent is a large company and can afford to wait for late payers, Mr Chong said, adding that money from China usually is delayed at least a month.
Medium and small-sized companies which expect to be paid within a month are disappointed, he said.
''If they can't get their capital returned they may have to liquidate,'' he said.
While Mr Czisla doesn't see the US threat of withdrawing China's MFN status as realistic, he said quota problems with Europe pose a bigger problem.
''The European Union is of the opinion that China ships far more merchandise under quota than it is allowed to,'' Mr Czisla said.
''If there are problems with the General Agreement on Tariff and Trade, the European Union will shift sourcing from China to Eastern Bloc countries.'' He warned that China could lose between 20 and 30 per cent of its exports of some products to Western countries in five to 10 years because the EU has to keep Eastern Bloc markets open.
