Asia Payment Survey 2018: Regional giants grapple with rising credit risks
Coface’s 2018 Asia Payment Survey covers nine economies. Data collection took place during the fourth quarter of 2017, and valid responses were collected from almost 3,000 companies. Respondents in Asia were under pressure to further extend their payment terms. Average payment terms increased to 64 days in 2017, up from 59 days in 2016. This is in line with the trend observed in Asia since 2015. Payment delays also increased in 2017, according to our survey. The proportion of respondents who experienced payment delays exceeding 120 days increased to 16.5% in 2017, from 12.5% in 2016. Payment delays were longest in China and India; shortest in Malaysia, Taiwan, and Japan. Divergences were also apparent among sectors: the energy and construction sectors featured the highest proportion of respondents reporting payment delays of 90 days or above.
The main reason behind longer payment delays in 2017 was customers’ financial difficulties, which were due to due to fierce competition impacting margins, as well as lack of financial resources.
In terms of cash flow risks, we examine the ratio of ultra-long payment delays (exceeding 180 days) as a percentage of total annual turnover. When these constitute more than 2% of a company’s annual turnover, its cash flow may be at risk. The proportion of respondents experiencing ultra-long payment delays exceeding 2% of annual turnover increased from 26% in 2016 to 33% in 2017. More worryingly, the number of companies with more than 10% of their annual turnover tied up in ultra-long payment delays increased to 10% in 2017, compared to 5% in 2016.