The impact of China’s recent economic downturn has been felt the world over, making it evermore clear that what happens in China doesn’t stay in China. New analysis from Atradius offers some updated insight into the financial impact of China’s economic woes on B2B trade.
In a report released Thursday (Oct. 22), Atradius published data on the rise of outstanding B2B invoices in China, signaling a threat to the cash flow of foreign businesses working with Chinese buyers.
According to the October 2015 Atradius Payment Practices Barometer of Asia Pacific, 62 percent of businesses in China said their domestic B2B corporate buyers have slowed down their invoice payments. That figure compares to the 46.3 percent of businesses across Asia Pacific that say the same.
Analysts examined the reasons for these slower payments and found that more than one-quarter (27.3 percent) of Chinese businesses said their domestic buyers experience formal insolvency, leading to a lapse in invoice payments. Again, that statistic is higher than the average across the Asia Pacific region, with 21.4 percent of APAC businesses paying the same.
Not only are businesses in China paying their suppliers later, but the value of outstanding invoices in the nation is also on the rise.
The research found that B2B invoices that are beyond 90 days past due have nearly doubled in value in the last year, with 7.5 percent of the total value of outstanding B2B invoices at 90 days outstanding this year (compared with 4.2 percent in 2014).
[bctt tweet=”China’s B2B invoices beyond 90 days past due have nearly doubled in value this year”]
“The longer receivables remain outstanding, the higher the likelihood that they turn into bad debts and write-offs, negatively impacting the cash flow and profitability of businesses,” Atradius said in its announcement.
Researchers pointed to the negative impact of outstanding invoices in China that affects foreign B2B traders, too. Atradius said the value of outstanding B2B invoices more than 90 days past due issued for foreign deals is “significantly higher” than it was one year prior.
For example, more than one-fifth of the value of past-due B2B invoices in Australia are more than 90 days past due; 12 percent of Indonesian foreign invoices are 90 days past due.
“The rebalancing of the Chinese economy has a significant impact on the whole Asia Pacific region, as well as on the global economy,” said Director of Atradius Asia Eric den Boogert in a statement. “Reflecting this, B2B trade volumes in the region have weakened especially in emerging economies. We have seen an upswing in payment defaults, raising trade credit risks in some economies in Asia Pacific.”
Overall, 2 percent of the value of outstanding B2B invoices across the Asia Pacific was deemed uncollectable, the report found.
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