TCM China: Is there a risk of payment default for your deliveries to China?
January 31, 2011 Category Members' News, Weekly
Open account payment terms are customary today in China. Open account sales are offered by about 65% of the companies, and that number is still growing. With an average of 60 days, the standard payment terms are longer in today’s China than in many other countries. In today’s China, most of the companies have experienced overdue account receivable, 75% of which exceed the 30 days after the payment due date. Preventing problems means learning about your client. But a common phenomenon, for example, is that Chinese companies keep three different sets of financial reports, one for the owner with the “real” numbers, one for the authorities like Tax Bureau, and one for the owner’s wife. Some companies are now having a fourth set, the one for their business partners. TCM China produces 400 reliable reports every day. What to do when faced with payment delinquency? An option is to go to courts. But China’s legal system still has a variety of problems. There is no Chinese equivalent of a Uniform Commercial Code to rely on. Besides, the enforcement of a court verdict in China often takes a year or two. An alternative to courts is arbitration. But the first step might better be amicable debt collection. TCM China (contact www.tcm.be) is quicker than courts, works no-cure-no-charge, saves your relationship with your client, and is quite efficient at finding assets and tracing people.
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