Companies marred by late payments suggest China’s slow economic recovery

As China’s economic growth is expected to slow in 2022, a payment survey by Coface, China’s credit insurance group, shows that many companies reported Ultra-Long Payment Delinquencies (ULPDs), meaning that companies are faced with payment delays of more than six months.

According to Coface, China’s economic growth is expected to slow to 4.8% in 2022, down from 8.1% last year. Companies in 9 out of 13 sectors reported an increase in late payments, led by agribusiness, which saw the largest 43-day increase, followed by wood, transport and textiles.

As the Chinese economy continues to face a significant slowdown, the real estate sector has also experienced a slowdown. Commodity prices have increased and the recovery in consumption is moderate.

Construction remained the sector with the highest share (56 pc) of respondents declaring ULPDs exceeding 10 pc of their annual turnover. According to Coface’s experience, 80% of ULPDs are never paid.

Bernard Aw, Economist for Asia-Pacific at Coface, said: “The recent outbreak of Omicron requires increased control of Covid in China and will aggravate global supply chain disruptions. sectors that have accumulated higher cash flow risks in 2021 due to the pandemic. »

Chinese companies are less optimistic about the country’s economic prospects. According to Coface.

Rising commodity prices, weakening market demand and the ongoing pandemic were key drivers, as reported by respondents. Global supply chains are also expected to remain strained. The Russian-Ukrainian war and China’s tough COVID policy are set to deal another blow to global supply chains.

Closures in Shenzhen and Shanghai in March and April impacted normal operations of inland logistics and warehousing services, despite continued port operations. This has already intensified the pressure on supply chains in March.

China’s logistics industry prosperity index also fell to the lowest since February 2020. The logistics sector is affected by the spread of the pandemic in several regions of the country, where differentiated pandemic management measures have disrupted interregional distribution and the ability to maintain a smooth flow. .

(Only the title and image of this report may have been edited by Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

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