China Suppliers Struggling to Get Paid
According to the South China Morning Post (SCMP), many businesses in China are facing increasingly long payment terms, with delays becoming more burdensome for cash-strapped companies due to the coronavirus pandemic.
The article adds that new research from insurance firm Coface shows the worsening cash-flow picture for many firms at the end of 2019, which will deteriorate as the economy slows.
Suppliers in the Zhuhai-based printer cartridge supplies industry are mostly tight-lipped about how things are going for them. All are back in production, with some admitting that sales and orders are significantly down. Some did say that payments are coming through while others are having to renegotiate terms.
“We only accept cash upfront,” one company CEO told RT Media. “Orders have definitely declined, but there have been new opportunities to supply facemasks and other PPE items. Sales of inkjet inks have increased slightly.”
SCMP quotes a number of small business owners who have also resumed production. “Since February, it has been said that all small and medium-sized enterprises (SMEs) have resumed production, but in fact, everyone has a serious shortage of orders and cash flow. How can we pay suppliers on time? Triangular debts among SMEs will be more severe than ever this year.”
The newspaper, based in Hong Kong, states the pandemic has created a domino effect, whereby indebted companies are unable to repay their suppliers, who are subsequently unable to pay their own suppliers, sending ripples through China’s supply chains.
According to Asia-Pacific economist Carlos Casanova, “Over a quarter of Chinese companies have more than 10 per cent of their annual turnover tied up in debts more than six months overdue. The vast majority of these “ultra-long payment delays do not get paid at all.”
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