China: rising payment risks in construction and energy sectors despite stronger economic outlook

Overall, the Chinese economy expanded by 2.3% in 2020, being the only major economy to record growth, and Coface expects the GDP to accelerate to a 7.5% growth in 2021.This would be the fastest pace since 2013, and comfortably above the minimum of 6% set by the authorities.

In normal times, higher economic growth should translate into fewer incidents of payment delays, but the recovery has been uneven across sectors. Thus, Coface’s 2021 China Corporate Payment Survey[1] shows that payment terms shortened by 11 days on average in 2020, falling to 75 days, while the distribution of credit terms leaned towards a shorter rather than longer period.

Finally, firms also benefited from greater fiscal and monetary support measures last year, which are expected to be further tapered this year. Coface expects an increase in bond defaults and insolvencies in 2021, especially among sectors that accumulated higher cash-flow risks in 2020 amid a slowdown in credit growth.

[1] This 2021 China Corporate Payment Survey was conducted between February and April this year, and surveyed over 600 companies across 13 broad sectors located in mainland China.