China’s private firms, fed up with crippling payment delays and ‘red-tape excuses’, push back
- Coface survey reaffirms gripes that arrears have got worse in China, while intense competition and overcapacity are changing industry mindsets
- As Beijing tries to invigorate the economy, on-the-ground reactions suggest more government spending is needed to stabilise demand and restore shattered confidence
China’s embattled private firms are changing the way they do business in the face of crippling payment delays, a more challenging demand slowdown and overcapacity complications, according to new findings.
Leon Jin is among those who learned his lesson the hard way. And it’s made him more cautious and risk-averse in his dealings, including with state-owned clients that can no longer be blindly trusted to make payments on time.
“It’s become increasingly tough to get the delayed payments,” lamented Jin, a materials supplier for the state-run power grid in northeast China.
His situation appears to have become more of the norm than an outlier when conducting business in China, according to the 2024 China Corporate Payment Survey recently conducted by Coface, which specialises in credit insurance and risk management.
“Before the pandemic, overdue payments were not so common, usually lasting no more than six months,” Jin said, emphasising that there has been a surge in payment arrears since the pandemic, with some even persisting for more than two years.
Jin recently said his state-owned enterprise client still owed him 120,000 yuan (US$16,700) for a project completed three years ago. Despite his efforts to reach out to the company for payment, he had received no response and was also not allowed to access their office premises.
“The cash flow hit is huge. For small and micro-sized enterprises like us, our projects simply can’t proceed without sufficient funding,” he said. “I’ll insist on full payment upfront in the future. I know I’ll inevitably have to take on fewer projects, but it’s better to turn down those that are only going to lead to more losses.”