Chinese auto giants cut payment cycle to within 60 days

A batch of Chinese automakers announced that they would shorten payment terms to their suppliers to within 60 days starting Tuesday evening.

As of the morning of Wednesday, 10 major auto manufacturers — including BYD, China FAW Group, Seres Group, Geely Auto, and Chery — had officially pledged to implement the new 60-day payment cycle. 

According to the automakers, the move is expected to boost cash flow efficiency across the automotive industry chain, support the growth of small and medium-sized enterprises (SMEs), and safeguard the stability of the broader industrial ecosystem.

The auto heavyweights also described the decision as a proactive response to the newly revised regulation on ensuring timely payments to SMEs issued by the State Council and coming into force on June 1. 

The revision addresses long-standing issues in market practice such as excessively lengthy payment cycles, unclear accountability, and insufficient regulatory oversight.

Notably, Article 9 of the regulation stipulates that large enterprises procuring goods, projects, or services from SMEs must settle payments within 60 days of delivery unless otherwise agreed upon in accordance with industry standards and customary practices.

In addition, the regulation prohibits "back-to-back" payment clauses that tie supplier payments to the progress of third-party payments, closing a loophole that has long delayed receivables for smaller suppliers.

lijiaying@chinadaily.com.cn