About two thirds (68%) of Chinese companies experienced overdue payments in 2016, down from the average of 80% over the previous five years, according to a survey on China corporate payments by global credit insurance company Coface.
Construction remained China's most at-risk sector in 2016 with 45.9% of companies reporting 2% or more of their turnover as being overdue for an ultra-long period of time. It will be another challenging year for highly indebted construction companies in 2017, against a backdrop of tighter monetary and credit conditions.
Only about 40% of respondents said they used credit management tools to mitigate non-payment risks, indicating that greater risk management efforts needed to be made in China.
In China, it is estimated that less than 2% of export trade is covered by credit insurance, and less than 5% of companies use credit insurance to protect what they receive.
"The Chinese market continues to grow and the coverage of credit insurance to support export trade has increased rapidly recent years," the survey report said.
Coface began conducting annual surveys on business payments in China in 2003, aiming to obtain an understanding of corporate credit management practices and payment experiences across the country.
In the 2016 survey, valid responses were received from 1,017 China-based companies, including private companies, state-owned companies, wholly owned foreign companies and joint ventures.