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China Risk Climate: Corporate Overdue Payments in China at High Levels

Coface 1Slower growth and increase in non-performing loans expected in 2015 

Coface, a leading trade credit insurance company, published asurvey on corporate credit risk management in China, which reveals that 8 out of 10 corporates experienced overdue payments in 2014.  Coface forecasts that GDP growth will slow down to 7% in 2015 (vs 7.4% in 2014). As corporates are still facing the challenges of high leverage, the high cost of financing and low profitability (driven by overcapacity), it is expected that non-payments will not improve in the short term.

Corporate overdues and non performing loans (NPLs): the risk of rising non-payments should not be overlooked 

79.8% of the companies interviewed in the survey reported overdues in 2014. This is a slight improvement compared to 2013, although they have remained at high levels for the last three years. Among them, more than half (56.7%) saw an increase in overdue amounts over the past year, up 11.7% compared to 2013. In terms of the length of overdues, 19.6% of respondents reported that the average overdue period exceeded 90-days in 2014, while only 17.8% had the same experience in 2013. The findings showed that, overall, payment behaviour in China remained very challenging in 2014.

This is in line with the non-performing loan (NPL) figures released by the China Banking Regulatory Commission. The NPL ratio rose to a multi-year high of 1.25%, as at the end of 2014.  The risk of  non-payments increasing should not be overlooked. 

To download the entire study click on this link

 

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