B2B payment practices trends, China 2024

Reports

Our survey of companies in China reveals key insights into current B2B corporate payment trends. Explore emerging dynamics that could shape the future of business transactions.

Silvia Ungaro

Senior Advisor

26 Sep 2024

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Credit confidence: Chinese firms report improved B2B payment trends

A clear finding from our survey is that most Chinese companies across industries are seeing either stable or improved payment behaviour from their B2B customers on credit. Almost 50% of businesses tell us there is no significant change in customer payment practices, notably in the energy/fuel sector, although they do also report ongoing issues with payment delays. Otherwise, invoices are generally being settled more quickly, although some businesses in the electronics/ICT industry note slower payments. Overall, late payments affect just over one-third of invoices in B2B trade, while bad debts stand at an average 3% of all B2B credit invoices. Chinese energy/fuel companies appear to be hardest hit by bad debts, suffering consequent financial strain.

Optimism high among Chinese companies despite economic challenges

A positive mood about the prospects for both B2B customer payment behaviour and Days Sales Outstanding (DSO) is evident in our survey of companies in China.

60% of businesses, particularly in the energy/fuel industry, tell us they anticipate improved invoice payment timings during the year ahead. One-third of companies, almost equally split between the automotive and electronics/ICT sectors, foresee no significant change in payment practices. Similar optimism is expressed about debt collection efficiency. 63% of businesses anticipate improved DSO in the coming year, notably in the energy/fuel sector, while 30% expect no significant change. Only a small minority of companies see a worsening of DSO on the horizon.

Uncertainty about the state of the domestic economy is the major concern looking ahead for companies in China. They tell us they are worried about a marked slowdown amid frail domestic demand, although external demand remains resilient. This anxiety is felt in both the short-term and long-term across all sectors. Another key concern is that of market saturation, again reported among all the industries of our survey. Intense competition makes it difficult for businesses to grow their market share, a worry most frequently expressed in the electronics/ICT sector which operates in a highly challenging environment where new products are constantly being introduced.

Summary

Almost half of Chinese companies tell us there has been no significant change in B2B customer payment behaviour during the past 12 months, notably in the energy/fuel sector. Among the rest, most businesses say invoices are being settled more quickly, although some in the electronics/ICT industry report slower payments.
Late payments currently affect, on average, just over one third of invoices issued by Chinese companies in B2B trade. Bad debts stand at an average 3% of all B2B sales on credit, with energy/fuel businesses the hardest hit.
The main reasons cited by Chinese companies for late payments are B2B customer cashflow issues, invoice disputes, and administrative inefficiencies in the payment process. Overdue invoices are turned into cash on average three weeks beyond the due date, and 42% of businesses tell us this causes cashflow problems.