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 per cent 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 per cent 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.
For all the pain being felt by Chinese corporations, the country’s banks are showing few outward signs of any credit trouble. At the end of the first half, the overall bad debt ratio for the banking sector was just 0.9 per cent, near an all-time low since the country’s banks were recapitalised a decade ago.
Of the big banks that have reported their third-quarter results, credit quality has actually improved. In quarter-on-quarter terms, non-performing loan ratios fell 0.5 basis point at China Construction Bank, 2bp at Agricultural Bank of China and 1.5bp at Bank of China.
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