In a recent survey conducted by Atradius, Asian businesses are found to be intensifying their credit risk management strategies as they maintain optimism for future growth, with the findings indicating that 70% of those polled anticipate an upsurge in demand in the coming months and are committed to addressing payment challenges inherent to business-to-business (B2B) trade.
While there is an overall expectation of global trade expanding by slightly over 2% in 2024, the pace of growth in Asia is anticipated to remain subdued, not reaching the levels seen in previous years. This restraint in growth, Atradius said, can be attributed to a continuing underperformance in exports, which may persist due to weaker demand from major export markets like the United States and the European Union, potentially weakening the domestic resilience exhibited by Asian economies this year.
Another example of this situation is a 6% decline in Asian businesses' B2B credit trading over the past year, with variations in different markets. Taiwan and Singapore witnessed significant drops, while China and Vietnam saw an increase in B2B sales on credit.
Nevertheless, Asian businesses are found to be optimistic about their growth prospects in the near future, as evidenced by the results of Atradius' survey, which encompassed companies in China, Hong Kong, Indonesia, India, Japan, Singapore, Taiwan, and Vietnam.
In addition to their optimism about future growth, the survey highlights the strong commitment of Asian businesses to address the challenges posed by deteriorating B2B payment practices, which reflect the vulnerabilities affecting the global economy and marketplace.
While the business landscape varies from one market to another, a common theme is the considerable emphasis Asian companies place on maintaining robust cash flow and liquidity. Various Asian economies, particularly China, Japan, and India, have already implemented rigorous measures to mitigate cash flow risks.
The survey also indicates that over 50% of companies in the region have intensified their efforts to collect overdue B2B invoices in the past 12 months. These efforts, combined with specific credit risk management tactics, have had a positive impact, resulting in a 12% reduction in late payments across Asia over the past year. Late payments now affect 44% of all B2B invoiced sales, while bad debts have slightly decreased to 5% of all B2B invoiced sales.
Companies in Vietnam, Singapore, and China have reported success in mitigating the impact of late payments, demonstrating the adaptability of Asian businesses in the current economic turbulence. This underscores the importance of comprehensive risk assessment when engaging in credit transactions with B2B customers.
“The flexible approach to credit management demonstrated by Asian businesses, which involves trade credit insurance for 47% of companies polled, is particularly relevant because it enables them to seize opportunities in a growing market while safeguarding against potential credit-related risks in B2B trade activities. Their ability to integrate trade credit insurance into their risk management framework showcases their resilience and forward-thinking approach to business operations and cash flow risks mitigation,” Atradius chief market officer Andreas Tesch said.
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