'Triangular debt' squeezes HK exporters' supply chain

Hong Kong exporters with factories across the border are battling overseas buyers who delay settling bills but want quicker delivery of finished goods.

Yeung Chi-kong, executive vice-president of the Toys Manufacturers' Association Hong Kong, said sluggish demand had prompted overseas buyers to delay orders and payment to exporters, weakening exporters' ability to pay their own suppliers, and even banks, creating a "triangular debt" situation.

Triangular debt, exacerbated by Beijing's tight credit regime, had ballooned so much that it could potentially be worse than the global financial crisis of 2009.

"Overseas importers are dragging their feet in settling bills by as long as 90 days in many cases against the usual period of about 60 days," Yeung said. "Exporters are in distress."

He said the period between the placing of an order and the shipment, also known as the lead time, had been shortened dramatically to less than a month from a common practice of two to three months. "Buyers lack confidence," he said.

Triangular debt is a key concern of mainland policymakers, who want economic stability in the lead-up to the leadership transition at the Communist Party's 18th Congress in Beijing in a few weeks.