China: use of credit insurance on the rise

Payment Practices Barometer

  • China
  • Agriculture,
  • Chemicals/Pharma,
  • Electronics/ICT,
  • Food

16th June 2021

Businesses polled in China plan to mitigate customer credit risk associated with B2B trade through a more frequent use of trade credit insurance over the next months.

Introduction

Compared to peers across Asia, more businesses in China anticipate using trade credit insurance over the coming months. This is likely to be a reflection of an increased appetite for trading on credit with B2B customers over the coming months.

The Atradius Payment Practices Barometer provides us with the valuable opportunity to  hear directly from businesses how they are coping with changed trading and economic  circumstances caused by the pandemic. The survey questionnaire was completed by  Chinese businesses during Q2 2021, a full year after the World Health Organisation declared Covid-19 a global pandemic.

Key takeaways from the report

Our survey highlights that the willingness of Chinese businesses to offer trade credit as part of their invoice payment terms is a reflection of sales strategies that actively seek to retain repeat business and attract new customers.

The average invoice payment terms offered by the businesses we polled in China was 67 days, far longer than the 54-day average for Asia as a whole. Although liberal invoice payment terms may give businesses a competitive edge, care should be taken to protect accounts receivable from this increased risk of late payments or bad debt.

To help them keep DSO (Days Sales Outstanding) levels stable, over half of the Chinese  businesses surveyed told us they plan to use credit insurance. This point to a strong focus towards enhanced credit management practices seeking to minimise trade credit risk, protect cash flow and profit, as well as create potential for business growth.

Key survey findings for China

  • Businesses polled in China transacted more than half of all B2B sales were on credit over the past year
  • During the pandemic, credit management costs increased 
  • Payment terms offered by Chinese businesses are longer than Asia average, most often reflecting company standards
  • Chinese businesses anticipate improvement in business performance due to domestic  economic rebound over the coming months
  • Use of trade credit insurance on the rise on the market

Interested in getting to know more?

For a complete overview of the payment practices in China and in the local agri-food, chemicals/pharma and ICT/electronics industries, please download the complete report.

Disclaimer

The statements made herein are provided solely for general informational purposes and should not be relied upon for any purpose. Please refer to the actual policy or the relevant product or services agreement for the governing terms. Nothing herein should be construed to create any right, obligation or responsibility on the part of Atradius, including any obligation to conduct due diligence of buyers or on your behalf. If Atradius does conduct due diligence on any buyer it is for its own underwriting purposes and not for the benefit of the insured or any other person. Additionally, in no event shall Atradius and its related, affiliated and subsidiary companies be liable for any direct, indirect, special, incidental, or consequential damages arising out of the use of the statements made information herein.