Asia: tight credit control to face economic turbulence

Payment Practices Barometer

  • China,
  • Hong Kong,
  • India,
  • Indonesia,
  • Singapore,
  • Taiwan,
  • United Arab Emirates
  • Agriculture,
  • Chemicals/Pharma,
  • Consumer Durables,
  • Electronics/ICT,
  • Machines/Engineering,
  • Steel,
  • Textiles

9th June 2020

With the global economy dipping into recession payment default risks are growing. Asia businesses display a tighther approach to credit management

Introduction

Atradius conducts annual reviews of international corporate payment practices through a survey called the ‘Atradius Payment Practices Barometer’. The survey explores a range of topics including insights into the credit policy and receivables management of businesses across a wide range of industries. The 2020 survey for Asia was completed by businesses in Asia during March 2020.

Key takeaways from the report

The percentage of B2B businesses offering trade credit as a sales tool varies from country to country throughout Asia. This is governed in large part by cultural attitudes towards credit and local responses to the economic challenges posed by the pandemic-driven threat of global recession. However, one unifying approach found in the survey results of every country polled is the commitment to tighter credit management.

With stormy times ahead, featuring an increased risk of bad debts and insolvencies, the vast majority of businesses throughout the region expressed their dedication to using one or more credit management tools to protect their accounts receivable. The credit management processes described by the businesses interviewed for the survey range from a reduction of single-buyer concentrations and demands for cash payments, to requests for letters of credit, payment guarantees, self-insurance and the adoption of credit insurance.

Many respondents reported using a combination of tools. Bank guarantees and letters of credit are frequently used by businesses in the United Arab Emirates, for example, whereas in Hong Kong, businesses expressed an increasing interest in credit insurance as the most comprehensive tool for securing accounts receivable while promoting growth.

Some businesses expressed optimism underpinned by government support packages, which was especially evident in the survey results of Singapore. A sizeable proportion of businesses across the region expressed the belief that the coming months would feature an increased dependence on bank finance. Regardless of the level of governmental  support or cultural approaches to credit and perceived risk, all businesses throughout the region would benefit from coherent credit management strategies with regular reviews and payment guarantee protections.

Key survey findings for Asia

For further insights in the B2B payment practices in each of the markets surveyed in Asia, please refer to the regional report or to the dedicated reports that form the 2020 edition of the Atradius Payment Practices Barometer for Asia, available for download on this website.

Available reports:

  • Asia (regional report): businesses tighten credit management in the face of economic turbulence
  • China: trade credit set to play a greater role in domestic B2B transactions.
  • Hong Kong: businesses turn focus to credit management as recession looms
  • India: bleak outlook for B2B trade credit risk
  • Indonesia: business confidence remains positive despite economic challenges
  • Singapore: higher perception of trade credit risk prompts focus on credit management
  • Taiwan: trend shifting towards use of trade credit in B2B transactions
  • United Arab Emirates: businesses anticipate significant deterioration of payment habits in B2B trade

Overview of B2B payment practices in Asia - By industry

A detailed overview of the B2B payment practices by industry in each of the markets surveyed in Asia is contained in the market reports that form the 2020 edition of the Atradius Payment Practices Barometer for Asia.

The regional report for Asia covers the following selected industries:

  • Chemicals
  • ICT/electronics
  • Agri-food
  • Textiles

 

 

 

 

 

 

 

 

 

Disclaimer

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