Payment Practices Barometer China

Summary conclusion

Despite never experiencing a recession in the Chinese economy, businesses in China have felt the impact of the global recession in the markets of their customers. As one of the largest
exporting countries in the world, China's trade flow to western markets in the United States
and Europe has resulted in Chinese suppliers experiencing the pain of their customers in
respect to lower order flows and payment delays. This impact is exacerbated by its heavy
reliance on its manufacturing base to drive the economy. As a result, Chinese respondents
were some of the most likely to experience un-agreed to late payments and requests for
extended credit terms of any country surveyed and subsequently a high likelihood of being
negatively impacted by late payments. Therefore Chinese respondents employ many of the
credit management practices surveyed to improve the speed and likelihood of timely payment
of outstanding invoices.

Notably, Chinese respondents tend to place a greater amount of importance on information
about their customer's actual ability to pay than respondents in many other markets surveyed
which points out their focus on this when selling on credit. This may be one of the more
important reasons why they make a relatively low percentage of credit sales compared to
other countries.

Ultimately a strong economy does not necessitate a safe trade environment, particularly when
it is reliant on other markets for a meaningful portion of its profits. The Chinese respondents
have been very diligent in their approach to credit management, but remain quite susceptible
to disturbances in the economic prosperity of the countries of their customers.
 

What do you do differently in your credit sales with domestic buyers compared to foreign buyers?

Basis: companies surveyed in China
Source: Payment practices barometer - Summer 2010

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Date: September 2010