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Corporate Partner Coface issue press release on China’s corporate overdue payments

Press release – 18 March 2014

Coface’s survey of corporate credit risk management in China carried out in the fourth quarter of 2013, revealed that 8 out of 10 companies in China experienced overdue payments in 2013.

The chemical, industrial machinery and household electronic appliances sectors are at higher risk.

Since credit facilities will remain tight in 2014, deterioration in corporate payments could lead to a significant ripple effect in China’s shadow banking market.

“The deterioration of payments in China serves as an alert. Traditionally speaking, smaller companies in China do not necessarily have access to enough credit facilities from the regular banking system and this is the main driver of the growth in the shadow banking system.  While we expect costs of funds to increase in 2014, the interest rate in the shadow-banking system is already high. The increasing trend in overdue payments exacerbates the liquidity issues of different stakeholders in the supply chain, and this vicious cycle could lead to a significant ripple effect,” says Rocky Tung, Economist of the Asia Pacific Region at Coface.

View full press release here.