China Regulates Automaker Supplier Payment Terms to Curb Supply Chain Squeeze

Chinese regulators have issued the country's first sector-specific rules governing accounts payable in the automotive industry, ordering automakers to overhaul payment terms for parts suppliers. Jointly published by the Ministry of Industry and Information Technology and the State Administration for Market Regulation, the circular mandates that payment clocks begin promptly upon delivery and inspection, restricts inspection periods to three to five business days, and discourages coercive non-cash commercial paper. The policy seeks to protect suppliers from cash-flow crunches driven by intense domestic price competition.

The policy targets widespread practices in China's automotive supply chain, including protracted inspection delays and the reliance on commercial acceptance drafts that effectively defer cash settlements. By defining clear statutory triggers for payment calculations and capping inspection times, regulators aim to shield upstream component manufacturers from severe liquidity pressures and prevent destructive price competition from undermining broader industrial supply chain stability.

China's Ministry of Industry and Information Technology (MIIT) and the State Administration for Market Regulation (SAMR) have jointly released a circular aimed at regulating how automotive manufacturers pay their component and service suppliers, state media reported on September 7, 2026. According to reports from CCTV News and Daily Economic News, the document, titled the "Notice on Promoting Automotive Enterprises to Standardize Supplier Account Payments and Optimize Payment Period Management," represents the country's first national sector-specific regulation governing payment periods and accounts payable. The directive sets out five main supervisory requirements to eliminate protracted payment timelines that have strained supplier balance sheets. First, it standardizes the start date for payment periods, explicitly stipulating that payment schedules must begin from the date suppliers deliver goods, engineering projects, or services and pass inspection. Second, the circular establishes firm ceilings on the inspection process to prevent original equipment manufacturers (OEMs) from delaying payments through open-ended acceptance procedures. Automakers are required to complete acceptance within three working days after receiving general production parts and materials. For functional components that strictly require on-vehicle validation, the acceptance process must conclude within five working days. Third, authorities addressed the widespread reliance on extended paper instruments by encouraging cash payments and forbidding manufacturers from coercing or covertly forcing suppliers to accept non-cash instruments. These restricted alternatives include bank acceptance bills, commercial acceptance bills, and supply chain promissory notes, which suppliers often struggle to discount without incurring steep financing costs. The regulatory intervention follows industry-wide strain linked to intense domestic vehicle price cuts, which regulators identified as a driver of irrational competition that threatens the stability of the industrial supply chain. In June 2025, 17 major Chinese automakers publicly pledged to keep payment terms within 60 days, leading to an average reduction in settlement durations over the subsequent year. Under the new regulatory framework, automakers are expected to formalize internal supplier payment governance systems and submit compliance reports covering semi-annual and annual payment performance each July and January.