Almost 90 per cent of companies in the Asia Pacific region had to deal with a non-payment in the last year. Especially companies in India, Singapore and China were hit by this. To protect their cashflow against payment risks, about four in ten companies in the region are planning to use credit management tools more often. This is indicated by the Payment Practices Barometer for Asia Pacific from Atradius, which surveyed the payment morale of companies in Australia, China, Hong Kong, India, Indonesia, Japan, Singapore and Taiwan.
“Although the Asia Pacific region performs well compared to other geographic regions, the global economic developments are leading to concern about rising debts and a decreasing credit quality,” Tom Kaars Sijpesteijn, general manager of Atradius Netherlands, explains. “This could lead to an increase in the number of bankruptcies in many emerging countries, especially in countries that are dependent on trade with China or that trade materials.”
Buying on credit
The Payment Practices Barometer shows that approximately 90 per cent of the suppliers in the Asia Pacific region give their customers the opportunity to buy on credit, compared to 78 per cent in Europe and 87 per cent in the US. On average, this applies to nearly half of business sales in the region, although it is less often the case in China (38.2 per cent). Furthermore, Chinese suppliers maintain shorter payment terms: 31 days compared with 37 days in 2015. Japan has the longest payment terms, 44 days. Late payments are caused mostly because companies find themselves in liquidity problems and cannot fulfil their obligation to pay, according to Atradius.
Protecting cashflow
The bad payment morale is causing over one-third of suppliers in the region to take measures to protect their cashflow. For 33 per cent, it even means they cannot fulfil their obligations to their own suppliers. A quarter need additional financing from banks or other money lenders to pay off their creditors. India has to deal with the domino effect caused by this most often. With 2.7 per cent, this country has the highest number of irrecoverable claims in the region.
With an expected increase of GDP by 5.7 per cent, the economy in the Asia Pacific region will probably grow faster than other economies. Dutch companies can also profit from this. For October and November, several trade missions to this region are on the agenda, they will go to countries including Japan, China, Australia and Indonesia. The two largest Asian economies, India and China, are setting the pace, by growing 7.5 per cent and 6.6 per cent respectively. China continues to perform relatively well, despite the growth recession, due to, among other things, a shift of focus to a growth led by services and consumption. Atradius recently published ten tips to successfully do business with China.
In the Payment Practices Barometer for Asia Pacific, Atradius gives an insight into the most important causes of payment risks, their consequences for the profitability of companies and the vision of entrepreneurs about developments in payment morale for the coming twelve months.
