As an informed exporter, it is important to know the major economic indicators of the countries where you are exporting. This is important to foresee if there are any possible chances of payment defaults. If there is, changes can be made in the payment terms. Hence, in order to aid this decision making process, we present the findings provided by the Euler Hermes in weekly frequency. Major indicators like GDP, sectoral development changes, major economic policies decision, sentiments after any new political appointment, bank rate changes etc. help in painting the economic condition of the country for the whole week.

Chinese companies are reporting delays in getting paid by business partners

China’s companies are being hit by a surge in delays in getting paid for their goods and services, and the implications are grave both domestically and abroad. The country’s slowing economic growth, tighter credit conditions and rising bond defaults are putting pressure on corporate cash flows, according to a survey by Coface.

Growth in the world’s second-largest economy slowed to 6.6 percent in 2018, the worst showing since 1990. Efforts by authorities to rein in high debt levels by constricting credit were a factor behind record corporate bond defaults, while the trade war with the United States also weighed on businesses and consumer spending.

The longest payment terms were seen in the automotive and broader transportation sector as well as the construction and energy sectors.

Coface queried 1,500 Chinese companies and found that 62 percent reported delays in getting paid last year. A total of 40 percent of respondents said payment delays increased last year, higher than the 29 percent recorded in 2017.

Pressure from the slowing economy and the trade war eventually caused authorities to pause last year in their efforts to pare down total debt, estimated at more than three times the size of China’s GDP, in order to try and support overall growth.

Corporate bond defaults in China surged in 2018, quadrupling in U.S. dollar terms to $16 billion. In total, 62 per cent of Chinese companies experienced payment delays in 2018. Over the course of a year, the average time it took for Chinese companies to receive payment rose by 10 days to 86 days. According to the insurers over half of companies are now waiting longer than six months for payments worth over 2 per cent of their total turnover.

Given this increasingly risky environment, one would be forgiven for expecting credit underwriters to reduce their portfolio and exposure in China.

More worryingly, there was a big spike in corporate insolvencies in China last year, because all of this was happening at a time when the central bank was trying to control debt and tighten liquidity. There has been a build-up of credit risk in the system, and that translated into a deterioration in payment conditions, both on the terms front and also in the number of companies that experienced delays. This definitely points to an accumulation of credit risk in the Chinese economy.

Source :  www.coface.com