Inter-Credit Newsletter(1) - September , 2018

General Information
As the second largest economy in the world, China has been developing fast in the past decades. However, as the saying goes, “Good cider still retains the barrel’s flavor, and black spots have been noted on the sun”, we should notice that the drawbacks have emerged during these years, especially the considerable increase of account receivables. 

Key Figures of Collection in China

  • According to the National Bureau of Statistics of China, the annual GDP of 2017 was 82.71 trillion yuan, exceeding the threshold of 80 trillion yuan for the first time. The GDP grew by 6.9 year-on-year and the growth rate was 0.2 percentage points higher than that of 2016. This is the first time that the growth has accelerated since 2010. 

  • As of the end of December 2017, the number of A-share listed companies totaled 3,266. The speed of IPO led to a continuous increase in the number of domestic A-share listed companies. The balance of accounts receivable of listed companies reached 4.23 trillion yuan, more than three times that of 1.26 trillion at the end of 2010. 
  • Although the collection of account receivables can be traced back to long time ago, due to Chinese’s traditional concepts and social customs, the development of collection industry was very slow for centuries. Until 2002, it began to have substantial development along with the booming growth of China’s credit card business. 
  • The number of legal entities engaged in the collection industry in China is about 3,500 to 4,000 with incomplete statistics. However, the number of legal entities that meet the requirements of the industry is less than 100 (for example, have professional operating systems, qualified employees, operational procedures meet safety standards, etc.).  

Causes of Account Receivables

Market Environment

  • On the one hand, the government continues to provide credit to encourage consumption. 
  • On the other hand, there is fierce commercial competition in the modern market economy. Credit economy has become the most effective means for enterprises to win customers and expand sales and operation scale. 
  • The role of the competition mechanism has forced companies to expand sales by various means. In addition to relying on product quality, price, after-sales service, advertising, etc., credit sales has become one important means.

Internal Factors of Enterprises 

  • Traditional Chinese enterprises do not have much awareness of credit management as a result of historical reasons and social customs. 
  • The risk control was not taken into consideration beforehand. Furthermore, due to a lack of technical ability, the risks could not be properly avoided, resulting in a lot of bad debts.
  • Most companies do not have a unified customer credit management system. They pay much more attention to the high profits of the books than the loss caused by credit risk and insufficient recovery of arrears, which makes the payments difficult to recover and generates accounts receivable.

Opportunities and Challenges of the Collection Industry

  • The credit market continues to grow, and collection industry is facing broad prospects for development.
  • The credit system is in the process of establishment, while there is still a shortage of collection legislation.
  • Collection agencies bloom and AI collection has become mainstream. 
  • Collections triggered social attention and the standardization of the collection is becoming a trend. 

Inter-Credit - Your Trustworthy Partner in China

  • 21 years’ experience on debt collection
— Rich multi-industry experience 
— Deep insight into industry characteristics
    • 42 branch offices

    — The largest service network in China

    • 1-to-1 customized debt solution
    — Tailor your solution to your business needs
    • 3,700  Professional & Diligent Collectors
    — Recover 850 million RMB every month

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