China Burdened with US$100 Billion Overdue Accounts Receivable

When visiting China for business purposes, present your business card with both hands, to each of your hosts in turn, and with honor.

Print your business card on a thick and larger size card stock. Print your Company and personal information on both sides of the card. One side in English, one side Mandarin. Business decisions are made over time, and after due considerations by your host Country officials.

Doing business in China is much different than in the North American continent. Some of the differences are not appreciated by some Corporations, and now it appears, that some American businesses are beginning to loose face in China, to the tune of $100 billion dollars.

With the strong impact of both the Asian and Middle East influence on the U.S. Dollar and the U.S. economy, this matter requires immediate attention by both American businesses and our State Department.

This $100 billion dollar loss of face in China, may be much more a component of our National debt and the weak U.S. Dollar, than Corporate abuse. And it will hurt us all, if it is not corrected very soon. Debt financing creates a weak U.S. dollar, but not paying your bills creates a cautious trading partner that may close the door on U.S. Trade.

I have reprinted this article from the People's Daily.
Originally published: March 30, 2005.
The People's Daily reflects the views of the Chinese people, expounds on justice and resolutions of the Chinese Government.


China burdened with US$100 billion overdue accounts receivable

As China turns itself a big trader, it has seen at least US$100 billion of overseas accounts receivable in arrears, and the figure is continuing rising.

This is learned at a seminar held recently on account receivable management and credit development in international trade.

With an export and import volume of over US$one trillion in 2004, China has become the world's third largest trader following the United States and Germany. At the same time, a large number of private enterprises and share-holding enterprises acquired the right to export, emerging as a new force with rapid growth of export.

However, at the same time, the bad-loan ratio of Chinese importing and exporting enterprises is disturbingly high: at least five percent. In the year of 2004, China saw around US$25 billion of new overdue accounts receivable.

According to Mei Xinyu with the Research Institute of Ministry of Commerce, there is no official statistics on China's overseas accounts receivable yet to be recovered.

Han Jiaping, director of the credit management department under the Research Institute of Ministry of Commerce, provided an estimation: China now has about US$100 billion of accounts receivable overseas and the figure is growing by US$15 billion each year.

Han stressed, China's financial system of enterprises is not as strict as compared in developed countries, where the reasonable time limit of an enterprise's accounts receivable is generally three to six months, and those overdue will be treated as bad loans. However, it is very common in China for accounts receivable to remain unpaid over two years and relevant information is not open to public.

There is stipulation only for listed companies: if their accounts receivable are overdue for more than two years, they must release relevant information. The problem with China's Changhong Electric Appliance Co. Ltd was known to the outside only when it was defaulted US$4.2 billion by a US company.

It is learned that China's bad-loan ratio is far higher than the 0.25 percent to 0.5 percent, the average of developed countries. The figure in some enterprises can reach as high as 30 percent and the term of the overdue debts of Chinese enterprises is relatively long.

According to relevant information, in the overdue accounts overseas, 10 percent has been defaulted for three years, 30 percent for one to three years and 25 percent for half to one year and 35 percent less than six months.

The overseas accounts receivable of Chinese exporting enterprises is still rising at an annual rate of US$15 billion. Geographically, overdue accounts receivable, which were concentrated in coastal cities, economic zones, and nowadays, are more and more seen in inland provinces, medium-sized and small cities and the areas lacking experience in foreign trade.

The large amount of overdue accounts receivable overseas will offset the actual efficiency and benefit of China's economic and trade activities, said Zou Xiangqun, head of China's credit professional commission.

Source: By People's Daily Online