Chinese market suffers payment delays, diminishing growth

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Chinese market suffers payment delays, diminishing growth

During 2018, China experienced a complex economic scenario, with a slowdown in its growth to 6.6% - a trend expected to continue downwards during this year, said insurance company for exports Coface.

This has led to companies registering a delay in their payments, it added.

Coface surveyed 1,500 Chinese companies on the issue. It found that in 2018, 62% of companies in the Eastern country had a delay in their payments.

According to the company, the period between payments increased to 86 days on average in 2018. This is up from the 76-day average that was reported in 2017.

Louis Des Cars, CEO of Coface Chile, told PortalFrutí that the global economic scenario also shows a slowdown in the world economy, as well as international trade.

"All commercial war impacts international trade that is on the downside. It is growing much less than before," the publication quoted Des Cars as saying.

What's more, the economic outlook does not seem to be improving. He explained that 59% of Chinese companies believe that the economy will not improve during this year. This percentage is the highest since 2003.

Considering its studies, Coface estimated that China's growth this year will be 6.2%.

"It is clear that after a period of strong growth, structural obstacles are finally reaching China's economy.

"The results of our survey of 1,500 Chinese companies confirm that the payment behaviors have deteriorated with the aggravation of fierce competition that reduces profit margins, lack of liquidity and with it the payment terms."

Implications for the agrifood industry

In this context, the economic situation of China is relevant for the agro-export sector of a number of countries.

Chile, for instance, was the main supplier of fresh fruit to the Chinese market during 2018.

"In the client portfolio that we have in Coface Chile, we are registering defaults in China over the fresh fruit sector," PortalFrutí quoted Des Cars saying.

Coface's research indicates that the agrifood sector has a medium risk. Yet this makes it better positioned than other industries such as automotive, construction, energy, and metals.

The food sector registered an increase of four days in the delay of payments. Thus, its average increased to a 59-day delay during the past year. This makes it the industry with the shortest payment time.

Along the same lines, the CEO of Coface recommended that exporters not focus on a single market.

"You do not have to be obsessed with the Chinese market, because China does have risk and you have to try to diversify."

On the other hand, the publication quoted Des Cars as emphasizing: "you have to be able to manage your have to ask yourself, how can I make sure to find clients that are solvent and keep my current clients, in addition to monitoring risk".

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