Chinese Exporters Owed US$150 Billion

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Aug. 27 – While it is usually stories of shoddy goods and late deliveries that typically crop up in English language media concerning Chinese exports, another side to the story has emerged with the China Chamber of International Commerce stating that Chinese exporters are collectively owed some US$150 billion in unpaid bills from overseas clients.

The global downturn, and a weak recovery has lead to smaller Chinese manufacturers often exposing themselves to credit risks in order to generate much needed cash flow in a shrinking market. The result has been an explosion in receivables with average credit terms increasing by 150 percent. Overseas buyers also have the advantage of knowing that it would be costly, time consuming and culturally awkward for Chinese manufacturers to litigate.

The China Council for the Promotion of International Trade (CCPIT), an affiliated body to the chamber, has stated that it would set up a special unit to assist Chinese exporters recoup debts. The amount of debt compares with China’s trade surplus last year of US$196 billion.

While much of the debt is expected to be an increase in the length of receivables rather than bad debt, stretching cash flow can cause problems to manufacturers especially as China’s labor laws have increased wages and made the laying off of staff difficult.

The CCPIT is urging Chinese companies facing receivables problems to contact the organization through their web site.

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