China Targets Corporate Arrears to SMEs with Stricter Payment Rules

A coordinated inter-agency push by Chinese regulators—including the Ministry of Industry and Information Technology, the central bank, and the state assets supervisor—is targeting payment delays imposed on small and medium-sized enterprises (SMEs) by large corporations. Unveiled at a State Council briefing following a circular on overdue payments, the initiative pressures industry leaders to adopt 60-day settlement targets, obliges central state-owned enterprises to prioritize cash payments, and curbs abusive supply-chain electronic voucher platforms that shift financing burdens onto smaller suppliers.

SMEs form the backbone of China's employment and supply chain resilience, but they have borne the brunt of downstream price wars and extended accounts payable cycles. By tightening payment deadlines, mandating cash settlements for central state enterprises, and allowing large firms to issue bonds to refinance trade payables, authorities aim to clear blockages in industrial cash flows and prevent credit distress from cascading down supply networks.

Chinese regulatory authorities have launched a coordinated campaign to curb protracted payment delays imposed on small and medium-sized enterprises (SMEs) by large corporations, taking aim at aggressive supply-chain credit practices that hinder economic liquidity. Speaking at a State Council policy briefing following the release of an official circular on SME payment arrears, Vice Minister of Industry and Information Technology Ke Jixin explained that intense price competition has driven some large corporations to exploit market dominance by lengthening settlement periods. To counter this, regulators are encouraging leading firms to issue and abide by 60-day payment commitments while defining standardized settlement nodes across major industries. To prevent liquidity bottlenecks from worsening as large enterprises adjust, financial authorities will guide commercial banks to support qualified corporate buyers in issuing bonds and securing bank loans dedicated specifically to refinancing outstanding accounts payable, Ke noted. Upstream supply-chain financing abuses are a central target of the clampdown. Cao Yuanyuan, director of the Financial Market Department at the People's Bank of China (PBOC), highlighted that dominant enterprises expanding interest-free trade payables shift financing costs directly onto suppliers, who must then borrow from banks to survive. Furthermore, some core companies delayed settlements by issuing electronic receivable vouchers while charging suppliers high fees or funneling them into affiliated commercial factoring arms at high interest rates—a dual-exploitation practice termed "eating at both ends." Under new inter-agency guidelines, electronic receivable vouchers are strictly capped at maturities of six months or less. According to the PBOC, total outstanding market vouchers fell 20 percent from their peak to 2.4 trillion yuan by late July, the average voucher maturity shortened by 92 days compared to the pre-regulation period, and 145 non-compliant platform operators have exited or committed to exiting the market. Central state-owned enterprises (SOEs) are being positioned to lead the operational turnaround. Pei Renquan, an official at the State-owned Assets Supervision and Administration Commission (SASAC), stated that central SOEs must adhere to cash settlement for SMEs as a strict standard, ban commercial notes and vouchers exceeding six months, and provide clear public channels to report delinquent payments. Concurrently, the China Securities Regulatory Commission (CSRC) is stepping up oversight of public companies. Guo Ruiming, director of the CSRC's Department of Listed Company Supervision, reported that over 100 firms have disclosed policies regarding fair treatment of SMEs in their sustainability filings, adding that regulators will refine disclosure standards and inspect listed SMEs facing cash flow squeezes.