70% of companies in the APAC region faced late payments in 2014- report

According to credit insurance provider Coface’s annual survey on Asia-Pacific region, that questioned 2,695 companies in 8 economies, 37% of the respondents reported that overdue amounts increased in 2014, up by 2% compared with 2013. Companies in China, India, Hong Kong and Thailand are particularly affected.

The study also points out that although the region’s general overdue situation deteriorated, a marked improvement on all indicators was witnessed in Australia (i.e. occurrence of overdues, length of average overdue and potential liquidity issues related to ultra-long overdues exceeding 180 days). Taiwan and Singapore also experienced improved payments in 2014, in terms of length of average overdue and weight of ultra-long overdues. In Japan, although more overdues and longer overdue periods were reported by companies in 2014, the weight of ultra-long overdues remained the lowest among countries in the region, while insolvencies and business closures also remained at low levels.

The report also notes that in China, the percentage of companies experiencing overdue payments in 2014 remained high. The Chinese economy’s high leverage, combined with the high cost of financing and low profitability of certain industries, means that the economic outlook for 2015 remains challenging. In Hong Kong, overdues became more common and longer in terms of days. Going forward, the highly expensive property market and the downwards pressure on Hong Kong’s retail market (resulting from less dynamic growth in tourism) may lead to headwinds for the economy.

In India, overdue situations became more common in 2014. Coface underwriters reported that corporate overdue payments in India deteriorated in 2014, with huge increases in overdues from companies across all sectors, headlined by companies directly or indirectly related to the construction industry (such as infrastructure). Partnership and proprietary owned companies were the most severely affected. Thailand’s business environment was weak in 2014, as shown by the number of companies that were dissolved. This means that corporate payment risks are high in Thailand. The trend is mainly led by the economic slowdown which suffered a sharp downturn when protracted domestic political turmoil affected growth momentum in the first half of the year. We noted a marked deterioration in payment experience in 2014, particularly for sectors related to household electric/electronic appliances, chemicals, building materials and steel.