Companies throughout the Asia-Pacific region, particularly those in China, are becoming increasingly cautious about extending credit. This shift is largely driven by a turbulent global economy, leading to a “concerning” rise in long payment delays. According to a recent report from global trade credit insurer Coface, many companies are reassessing their approaches to credit sales amid these uncertain economic conditions.
Cautious Future: Shortening Payment Terms
The report indicates that two-thirds of firms in the Asia-Pacific region expect payment terms to shorten over the next six months. This trend reflects a growing emphasis on cash preservation as businesses navigate heightened economic uncertainty. The findings underscore a significant shift in how companies are managing credit risk during challenging times.
Current Payment Trends
While payment terms increased slightly from 64 to 65 days in 2023, they remain below the 2018-2022 average of 69 days. These statistics are based on a survey involving 2,600 companies conducted between December 2024 and March 2025. The tightening credit conditions signal a broader trend of wariness in financial dealings across various sectors.
Regional Specifics: China’s Decline in Credit Sales
Among the nine economies surveyed—including Australia, Hong Kong, Taiwan, Japan, Malaysia, India, Singapore, and Thailand—mainland China experienced the steepest decline in the proportion of firms offering sales on credit. The report notes that approximately 65% of Chinese firms provided credit terms in 2024, a drop of 14 percentage points from the previous year. This significant downward trend highlights the growing hesitation among Chinese companies to extend credit in a shaky economic climate.
In contrast, India followed with a nine-point decrease, while Hong Kong displayed the largest increase—up 10 points to 91.4%. This divergence in trends illustrates the varying levels of confidence among different economies within the Asia-Pacific region.
Payment Overdues: A Mixed Picture
Interestingly, there was a record low in the share of Asian companies reporting payment overdues, decreasing to 49% last year from 60% in 2023. This reduction can be attributed to the implementation of longer payment terms in many markets, allowing companies more time to settle their accounts and avoid overdue payments.
Despite this positive development, Coface highlighted a troubling trend: a substantial increase in firms reporting ultra-long payment delays (those extending over 180 days). The proportion of firms facing these significant lapses increased dramatically from 23% to 40% in 2024, indicating that while some businesses manage payments better, others struggle increasingly with severe delays that bear consequences on their operations and cash flow.
The Economic Context
The backdrop of these changes is a global economy characterized by uncertainty. Factors such as inflationary pressures, fluctuating demand, and geopolitical tensions are prompting companies to rethink their credit policies. The Asia-Pacific region, being a crucial hub for trade, is particularly sensitive to these shifts. As firms adjust their sales strategies and payment terms, businesses must remain agile and responsive to their changing financial environments to mitigate risks.
Strategies for Navigating Payment Delays
As companies face these mounting challenges, they can employ various strategies to navigate long payment delays and adapt their credit policies effectively. Here are some approaches worth considering:
Strengthening Financial Resilience: Businesses need to bolster their financial positions through careful cash management and liquidity planning. This can include creating cash reserves that can cushion against payment delays.
Re-evaluating Credit Risk: Companies should conduct thorough risk assessments and adjust their credit policies according to customer profiles and economic conditions. Stronger credit assessments can help in reducing potential overdue payments.
Exploring Alternative Payment Solutions: With technology evolving rapidly, businesses can look into adopting more flexible and innovative payment solutions such as digital payments, which may streamline transactions and reduce delays.
Engaging Open Communication: Building strong relationships with clients and maintaining open lines of communication can lead to better understanding and negotiation of payment terms, making it easier to manage expectations around credit and payment schedules.
- Diversifying Portfolios: Expanding into new markets or diversifying customer bases can help alleviate dependence on certain clients or sectors, potentially reducing risk exposure to long payment delays.
Conclusion
The landscape for companies in the Asia-Pacific region is undeniably shifting, with rising concerns about long payment delays. Though the overall indications show some gains in managing payment overdues, the stark rise in ultra-long payment delays can’t be ignored. As companies move forward, an adaptable attitude toward credit and payment practices will be essential for survival in an unpredictable economic climate. By taking proactive measures and adjusting strategies to align with market realities, businesses can not only safeguard their operations but also pave the way for enduring growth even amid the challenges of an uncertain world economy.
