Corporate China Hit by Unpaid Bills

Chinese listed companies have reported a sharp rise in unpaid bills during the third quarter, in one of the clearest signs yet of the toll that China’s economic slowdown is taking on corporate balance sheets.
A Financial Times analysis revealed that 66 percent of listed Chinese companies that have reported third-quarter results showed a year-on-year increase in such unpaid bills – called accounts receivable in accounting – as a proportion of sales, according to the S&P Capital IQ database.

China’s economy is on track to grow at less than 8 percent this year, which would be its slowest in more than a decade. While that is still very fast by international standards, many companies have invested on the expectation of sustained double-digit growth and the sharp rise in accounts receivable is an indication of how even a mild slowdown has caught them off guard.

The hardest hit companies are those linked to the construction and infrastructure sectors, including machinery makers, steel mills, coal and cement companies.

Sany Heavy, the world’s ninth-largest machinery maker by sales, reported that accounts receivables were up 83 percent year to date at the end of the third quarter, hitting Rmb21 billion. “Due to the impact of the macroeconomic environment, sales repayments have seen some deferrals,” the company said. Other machinery companies reported similar problems: at Shanghai-listed First Tractor, accounts receivable rose 169 percent from the beginning of the year.

At Zoomlion, a leading Chinese machinery maker, accounts receivable at the end of the third quarter were up 69 percent from the beginning of the year, according to earnings released on Tuesday.

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