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Chinese suppliers are facing growing pressure to accept longer payment terms from corporate buyers in order to gain an edge on their rivals, a survey by trade credit insurer Coface has revealed.

The survey polled over 1,000 suppliers from across all major economic sectors, including transport, automotive, ICT and pharmaceuticals, with turnovers ranging from under Rmb50mn (US$6.84mn) to over Rmb1bn. Three-quarters of those polled mainly do business in China, with a quarter being export focused.

While late payments in the country are down, with only 44% of respondents surveyed reporting overdue payments compared to 62% in 2023, average payment terms increased from 70 to 76 days in 2024. Overall, total days outstanding have risen from 133 days in 2023 to 141 in 2024.

Among companies offering credit sales, market competition (26%) and prevailing market practices (23%) remained the main drivers. Meanwhile, fewer respondents said they accept payment terms based on confidence in their clients’ repayment abilities, with that figure falling to 14% in 2024 from 16% in 2023.

A worsening risk environment is also reflected in the decrease in the number of suppliers that accept longer payment terms at all, which has fallen from 79% to 65%. This figure is also below pre-Covid averages of 74% between 2015 and 2019.

The report also notes a rise in non-payment risk, with almost half of respondents experiencing “ultra-long” payment delays – defined as delays of over 180 days – reporting that the total outstanding was over 2% of annual revenue, up from only 33% in 2023.

Junyu Tan, one of the authors of the report and a North Asia economist for Coface, says these trends look likely to worsen as the year goes on.

“The problem now is that China is undergoing a deflationary environment, even though sales volume is still rather solid,” he tells GTR.

“If we consider the decline in prices, which on average fell 2% for producers in 2024 and slightly for consumers, that eats into the revenue of your buyers, which means that even with some slight improvement in sales volume, the total revenue for buyers is still worsening.”

China’s deflation is being driven in part by weakening domestic demand for products, particularly in the construction and associated sectors as the housebuilding boom dies down. Despite some government programmes designed to boost domestic demand, they have so far remained too limited to do much to move the needle, the report says.

The sheer number of companies in the country is also posing problems, with 65% of respondents citing too much competition as a risk factor going into 2025, followed closely by slowing demand at 56%.

In response to intense domestic conditions, suppliers might be tempted to look to foreign markets, but Tan says that current global dynamics mean that Chinese companies are unlikely to be able to offload product abroad.

“I don’t think China can turn more to international buyers at this moment,” says Tan. “Domestically, the situation is challenging, given the deflationary environment, but externally is not much better. With so many talks on tariffs and trade barriers, I don’t think external demand would be a lot better this year after a shallow rebound last year.”

In November of last year, China’s vice minister of commerce Wang Shouwen announced an expansion of support from the country’s export credit agency, Sinosure, in response to major trade headwinds.

In the long run, however, the currently unfavourable tariff environment in the US might be a boon to some suppliers, Tan believes. He explains that despite labour-intensive sectors like toys and sporting goods being highly exposed to the tariffs, China’s expanding domestic stimulus packages may allow other sectors to grow.

“There have also been some winners from these domestic stimulus efforts,” Tan says. “For example, I think the Chinese policymakers have the usual playbook to ramp up infrastructure to stimulate domestic activities, but the focus now is more on the so-called ‘new infrastructure’, like green or digital infrastructure.

“Suppliers across that value chain benefit. Recently, the focus has also been tilted a little bit more to stimulating domestic consumption as well, especially through trade-in programmes which subsidise the replacement of certain products [like] automobiles, home appliances, and also some personal electronics.”

A Chinese payments survey conducted by trade credit insurance firm Atradius in Q3 of last year showed similar but slightly more positive results, with 34% of businesses reporting past due invoices and the majority of respondents reporting either no change or a reduction in days outstanding over the past year. 60% also expected payment practices to improve in 2025.

This is in line with a global survey from November of last year carried out by working capital provider Taulia, in which 85% of respondents said they were optimistic about 2025, and 56% described themselves as “very optimistic”. At the same time, however, it reported that globally 51% of suppliers are regularly paid late.