In our today-world, businesses must develop their operations to grow otherwise competitors may occupy the empty share left on the market. With the volatility of the international and domestic situations, the economic outlook looks uncertain so it  may have an impact on the financial situation of businesses when it comes to grab market shares.

Below you will find the key takeaways from the report issued by Atradius about the payment practice in China.

^{Strategic credit risk management key to enable safe business growth}

• Selling on credit has a major importance in B2B trade in China, with half of the businesses polled in our survey reporting they were more willing to agree trade credit requests than previously. This appears to be a clear factor in the Chinese business environment – even despite concerns expressed about the spiraling costs of chasing down unpaid B2B trade debts and a slight increase in customer payment defaults during the past few months.
• With this, however, comes an unmistakable message – that doing so requires strong and effective strategic management decisions in dealing with the risk of customer payment default. Among the various alternatives available in the market, outsourcing credit risk management to a credit insurer, which can be complemented with specific trade finance solutions, appears to gain growing interest in China. Companies are 20% more likely to go for this approach than previously.

^{Positive outlook, bigger role of credit insurance to protect cash flow}

• Almost one third of companies polled in China told us they had suffered a deterioration in Days Sales-Outstanding (DSO) during the past months, with the consequent fear of a knock-on effect on liquidity issues. Businesses took several proactive measures to reduce the impact of customer payment default, opting most often for a policy of offering discounts to persuade B2B customers to make early payments of invoices and help cash inflows.
•  The primary concern of businesses in China, as with so many markets around the world, is protecting themselves against the ongoing impact of the pandemic in a generally challenging economic and trading environment. This is expected to trigger a further deterioration in DSO in the coming year, and may explain why a significant number of businesses (35%) in the China market said they would continue using credit insurance in the period ahead.

_{Key survey findings for China}

• Increasing role of trade credit in financial support for B2B customers
• Customer payment terms tighten, cost of financing credit sales worries businesses
• Deteriorated unpaid B2B invoices prompt focus on stronger collection efforts
• Cash flow strained by knock-on effect of payment default
• Impact of customer payment default blunted by tough measures
• Expansion of trade credit likely amid concern over economic growth slowdown
• Increased awareness of credit insurance to mitigate impact of DSO deterioration

To get the full report about payment practices in China, please click here.