An increasing number of Chinese firms are adopting credit insurance as a tool to manage credit risk despite experiencing less overdue payment over the recent years, a latest survey has found.
The results of the survey conducted by international credit insurance company Coface and released on Thursday showed that 67.4 percent of the respondent companies experienced overdue payment in domestic sales last year, down from 72 percent in 2009 and 91.2 percent in 2008.
Only 6.2 percent of respondent companies experienced payment overdue for more than 120 days in 2010, down from 13.2 percent in 2009.
Christophe Souquet, regional risk director for Asia Pacific, attributed the improving payment overdue situation to strong domestic consumption and government stimulus.
Nevertheless, about 85.4 percent of the surveyed companies have put in place procedures to manage their credit risk last year.
Credit insurance is also getting popular, with 42.3 percent adopting the tool last year, up from 32.3 percent in 2009.
The survey also found that 53 percent of the companies increased credit sales due to keen competition in the domestic market. Among them, 44.6 percent increased credit sales to penetrate new domestic markets last year, up from 31.7 percent in 2009.
However, the companies were found to be not so confident in further improvement of payment behaviour. About 41.4 percent said they expected it to take more than three years for the overdue situation to improve.
Souquet said at the briefing in Singapore that he expected the tightening coming ahead to have an impact on the overdue situation in China but nevertheless added that the situation would continue to improve as the economy remained strong.
The survey was conducted from October to December last year and covered 1,071 companies of all sizes in various industrial sectors in China.