China’s private firms facing persistent problem of overdue payments despite Beijing’s pledge to support key sector

Beijing has pledged to build the private economy, which it views as the backbone of the economy, ‘bigger, better and stronger’

But in Henan province alone last year, over 9 billion yuan (US$1.2 billion) of overdue payments by local governments and state-owned firms were added

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While the private economy contributes over half of the country’s tax revenue and more than 80 per cent of the urban workforce, private sector profits fell by 13.5 per cent in the first half of the year. Photo: Xinhua

Published: 11:00pm, 11 Aug 2023Updated: 12:38pm, 5 Sep 2023

Overdue payment problems for China’s private firms are becoming more severe and worrisome, with audit reports from several top economic provinces showing billions of yuan worth of debts owed by the government and state-owned firms.

The mounting problems are set to undermine Beijing’s efforts to revive the sector, which it views as the backbone of the economy.

The audit reports from provinces including Guangdong, Jiangsu and Henan show overdue debts owed to the private sector, which is a major source of employment and contributor of fiscal revenue.

Beijing has only just rolled out its strongest bid in years to prop up over 47 million registered private firms, a vast majority of which are small players, and more than 100 million self-employed businesses.

Persistent overdue payments have been the norm at our company for years and there is hardly a solution

Yang

“Persistent overdue payments have been the norm at our company for years and there is hardly a solution,” said a business manager surnamed Yang at a state-owned firm in southwest China. Yang asked not to be identified due to the sensitivity of the issue.

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