China's Automotive Sector Sees Improvement in Average Payment Terms

China's Ministry of Industry and Information Technology (MIIT) has reported a notable improvement in the average payment terms extended by major automotive companies to their suppliers. This development aims to alleviate financial pressures on smaller businesses within the automotive supply chain and enhance overall economic circulation.

The ministry identified lengthy payment cycles as a symptom of irrational competition that burdens suppliers, particularly small and medium-sized enterprises (SMEs), and can destabilize the industrial chain. To combat this, 17 key auto manufacturers committed to payment terms not exceeding 60 days.

Surveys indicate that these efforts have led to a reduction in average payment durations and a decrease in outstanding payables, with a notable shift towards electronic payment vouchers. However, MIIT acknowledged that a gap persists between the current average payment terms and the expectations of suppliers, especially SMEs. Issues such as inconsistent start dates for payment periods and acceptance criteria that effectively extend payment terms remain.

MIIT stressed the need for sustained efforts to address these remaining disparities. The ministry plans to continue promoting adherence to shorter payment terms and greater transparency throughout the automotive sector to foster a more stable and equitable business environment for all participants.