Seven out of 10 companies in the Asia Pacific region experienced overdue payments in 2014, the highest level in three years, according to the latest survey from Coface.
The credit insurer canvassed 2,695 companies across eight countries in the region. In addition to the 70% that reported overdues, 37% of respondents reported that overdue amounts increased in 2014 – up 2% on the previous year.
While the region’s general overdue situation deteriorated, Australia was an exception with a marked improvement on all indicators. 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.
“While Australia’s corporate payment experience continues to improve, its economy still faces some headwinds,” said Rocky Tung, Coface economist for the Apac Region.
“As Australia’s exports will be hurt by the less dynamic Chinese economy, more support is needed to boost the country’s domestic demand. With its entry into the Asian Infrastructure Investment Bank (AIIB), Australia could see a revival in the demand for natural resources, which would be beneficial to this resource-rich country.”
In China, the percentage of companies experiencing overdue payments in 2014 remained high. The Chinese economy’s high leverage nature, combined with the high cost of financing and low profitability of certain industries, means that the economic outlook for 2015 remains challenging.
Coface added that its risk policy remains cautious on industries affected by overcapacity issues, such as iron, steel, cement, shipbuilding, aluminium, glass for construction, coal mining, paper and printing.
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 deteriorated, 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 key victims negatively 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. Coface said that it noted a marked deterioration in payment experience in 2014, particularly for sectors related to household electric/electronic appliances, chemicals, building materials and steel.
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