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Businesses warned of China's payment problems PDF Print E-mail
Friday, 13 November 2015

Trade credit insurer Atradius urges businesses trading with China to protect against  the rippling effect of the country’s economic slowdown.

In a new research report, Atradius reveals that invoice payments have slowed in China due to a drop in liquidity, and the region’s B2B trade credit risk outlook has worsened.

Atradius’ annual Payment Practices Barometer for the Asia Pacific found that nearly two thirds (62%) of Chinese businesses reported that domestic B2B customers have slowed invoice payment due to liquidity problems in the past year – significantly higher than the Asia Pacific average of 46%. The report found that insolvency was the cause of more than a quarter (27%) of late Chinese B2B payments and that the value of Chinese invoices more than 90 days late has almost doubled in the last year from 4% to just under 8%.

Mike Rowan, Regional Manager at Atradius’ Northern Hub said: “The managed slowdown of China’s economy appears to be having a substantial impact on its insolvency environment which is forecast to trigger a worsening of B2B trade credit risk in several Asia Pacific countries. According to our latest report, the warning signs of these ripple effects are already there. The rebalancing of the Chinese economy has a significant impact on the whole Asia Pacific region, as well as on the global economy. Reflecting this, B2B trade volumes in the region have weakened especially in emerging economies. We have seen an upswing in payment defaults, raising trade credit risks in some economies in Asia Pacific. However, the good news is that China’s deceleration is not forecast to deteriorate the outlook for the wider region.”

“While businesses trading with China need to be aware of these risks, they should not write-off opportunities in haste. If businesses operate cautiously, manage these risks correctly and take adequate protection, successful trade is still viable in China. Additionally, with the Asia Pacific market set to remain the most dynamic performer in global growth – based on strong economic growth rates - businesses can seek new trade opportunities within the region. Forecast growth within this Asia Pacific ranges from 2.5% in Hong Kong to more than 5% in Indonesia, with India in the lead at 7%, supplanting China’s role as the main engine of growth.”

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