China: Longer payment terms helped mitigate increases in payment delays

Coface’s survey on Chinese corporate payment behavior shows growing caution among suppliers to offer credit sales and extended collection period in 2024.

• Companies generallyextended their payment terms, aided in part by third-party risk mitigation tools that may provide some comfort for suppliers to accommodate client needs.
• Longer payment terms have mitigated increases in payment delays, which rose only slightly from 64 days to 65 days.
• However, if payment delays are added to payment terms, the total average waiting time between product delivery and payment collectionincreased from 133 days in 2023 to 141 days in 2024.
• Among respondents that experienced ultra-long payment delays (ULPDs, above 180 days), almost half reported late payment worth at more than 2% of annual turnover. This proportion was significantly up from 33% in 2023 and implied a rise in non-payment risk.

Junyu Tan, North Asia Economist at Coface, says: 

“The collection period for Chinese suppliers lengthened in 2024, due to declining corporate revenues, driven by slower volume growth amid sluggish domestic demand but also by price pressures in an ongoing deflationary environment. 

While suppliers extended payment terms on average, growing caution was evident as fewer companies offered credit sales. Looking ahead to 2025, 52% of our respondents expected the economic outlook to improve as government stimulus efforts may have bolstered confidence among companies. 

However, this optimism could be overstated, as stimulus measures have been relatively restrained so far, and tariff risks for trade sectors remain a looming challenge. Coface expects China’s GDP growth to stand at 4.3% in 2025.”

Payment delays¹: Increasing ultra-long payment delays

Companies generally extended payment terms in 2024, aided in part by third-party risk mitigation tools. The average total payment terms increased from 70 days in 2023 to 76 days in 2024. Thanks to these more generous terms, payment delays remained relatively stable, rising only slightly from 64 days to 65 days. The share of respondents reporting past dues considerably reduced from 62% in 2023 to 44% in 2024.

However, if payment delays are added to payment terms, the total average waiting time between product delivery and payment collection, known as days sales outstanding (DSO), increased from 133 days in 2023 to 141 days in 2024, indicating an extended collection period from a year ago.  

Meanwhile, among respondents that experienced ultra-long payment delays (ULPDs, above 180 days), 50% reported late payment worth more than 2% of annual turnover. This proportion was significantly up from 33% in 2023 and implied a rise in non-payment risk. Based on Coface’s practical experience, 80% of such delays, above 180 days and exceeding 2% of suppliers’ annual turnover, were not able to be collected.

By sector, the wood industry has experienced the most significant extension in payment delays, primarily driven by the prolonged housing market crisis that suppressed furniture demand and led to a significantly longer settlement cycle for the sector. Meanwhile, the automotive sector faced similar challenges. This was largely attributed to…