Small Chinese exporters face hit to profits as buyers demand extended payment terms
Shorter payment cycles previously gave exporters an advantage, but complex environment now presents bigger challenges
At the ongoing autumn session of the Canton Fair, China’s largest and longest-running trade exhibition, many Chinese exporters say that overseas buyers’ demands for extended payment terms are becoming one of their biggest challenges in maintaining profits.
The pressure on small and medium-sized enterprises (SMEs) – across a range of industries – is particularly acute.
“A regular client suddenly demanded 90-day post-shipment payment because other suppliers offer longer terms,” said Kevin Huang, a lighting exporter at the fair in Guangzhou. “If we don’t comply, we risk losing the order.
“SMEs have to front-load material, production and shipping costs. If cash is tied up for three months or more, orders could easily turn into a possible loss.”
The trend stems from the combined effects of tighter overseas liquidity and rising inventory pressures in a more complex global macroeconomic environment for Chinese exporters – a sector that remains a key driver of the world’s second-largest economy.