The Chinese chemicals industry has entered a phase of lower but still solid growth, following a slowdown in GDP growth. However, despite the slowdown, both Chinese GDP expansion and chemicals demand growth rates remain above the global average.
The Chinese government is actively encouraging joint ventures between foreign companies and state-owned enterprises. The benefits for foreign companies investing in China include a growing domestic market, and low construction and labour costs when building greenfield projects.
In the long term, China’s growing industrialisation and urbanisation will provide further growth opportunities for the chemicals industry.
On average, payments in the Chinese chemicals sector take around 60-90 days. The level of payment delays and insolvencies in the sector is average.
No major increase of business failures is expected this year, as demand for chemical products is relatively stable.
Many businesses have faced oversupplies because of the investment-led growth model that has resulted in excessive spending on new factories in the past. Overcapacity issues have resulted in deteriorating business profitability in some segments.
Competition in the Chinese chemicals sector is high, as overcapacities have driven businesses to reduce output and cut prices in order to gain a competitive edge.
Trade receivables risk mitigation
China has had a vivid history of trade receivables collection. It was prohibited by the Chinese government in the late 19thcentury and is still prohibited by law today. Therefore, trade receivables collection officially does not exist, but there are companies who provide collection services through specialised legal firms that are authorised to collect Chinese trade receivables. Nowadays, businesses in China have shown more interest in outsourcing their past due trade receivables to collection agencies and law offices.
For Atradius Collections, we collaborate with local law firms to provide third-party and legal collection services in China. Our team have experienced collectors with legal backgrounds, which are essential for collecting trade receivables in China.
If third-party collections do not yield results, we would consider taking legal action after consulting with you. There is no need to give a warning prior to starting a lawsuit. When a case is sent to court, there may be a pre-court procedure, which can be skipped before normal proceedings begin.