1. China's small and medium-sized enterprises (SMEs) are facing a severe crisis of difficulty collecting payments, as rising accounts receivable strain their cash flow, dampen business confidence, and discourage reinvestment, ultimately threatening the smooth circulation of the national economy. [para. 1]
2. The State Council has issued a notice on strengthening efforts to address payment-collection problems facing small businesses, building on earlier measures, while amendments to the Anti-Unfair Competition Law and regulations safeguarding SME payments have already spelled out specific obligations for settling bills. [para. 2]
3. At a State Council policy briefing on September 14, Vice Minister of Industry and Information Technology Ke Jixin stated that some large companies compete ruthlessly on price while forcing smaller suppliers into ever-longer payment terms, using their market power to "play tricks and use gimmicks" to delay payment. [para. 4]
4. Extended payment terms drain small businesses' working capital, disrupt normal operations, undermine healthy industry development, weaken the country's social-credit system, and impede the free flow of the broader economy, making a targeted cleanup overdue. [para. 5]
5. The abuse of payment terms is fundamentally an abuse of market power and a form of unfair competition, with small and medium-sized businesses occupying the weaker position in industrial supply chains, subject to excuses such as obscured payment start dates, delayed inspections, and postponed final settlements. [para. 6][para. 7]
6. Some dominant companies have additionally used self-built platforms and electronic accounts-payable certificates—noncash instruments—to extend effective payment periods further, but the new notice addresses these practices with specificity, calling for clearer industry rules on settlement, payment clocks, acceptance standards, deadlines, and maximum payment periods. [para. 8][para. 9]
7. Large companies, particularly industry leaders, are encouraged to publicly commit to paying small businesses in cash within 60 days of delivery of goods, projects, or services, while electronic payment certificates have their maximum payment period cut to six months, with platforms barred from issuing longer-term instruments and banks and factoring companies barred from financing them. [para. 10][para. 11]
8. The quality of any policy lies in its enforcement—if cash payments within 60 days can truly be delivered, they will be a lifeline for small businesses, though resistance will be considerable, as seen in the auto industry where several automakers pledged in June 2025 to limit payment terms to 60 days, with the China Association of Automobile Manufacturers issuing an initiative on supplier-payment standards. [para. 12][para. 13]
9. Payment difficulties fall into two categories: the first involves large companies with adequate funds that deliberately extend payment cycles, which is relatively easier to address through stronger supervision and heavier penalties, including interviews, rectification, stricter enforcement of the Anti-Unfair Competition Law, and improved disclosure requirements. [para. 14]
10. At the September 14 briefing, an official from the State-owned Assets Supervision and Administration Commission said centrally administered state-owned enterprises would be pressed to standardize payment behavior and strive to "pay all amounts due, and pay them promptly," emphasizing three leadership roles: leading by not defaulting or delaying, leading by issuing fewer invoices and making more cash payments, and leading by breaking unreasonable industry rules, with a complaint platform for debts owed by central SOEs also opened. [para. 15][para. 16]
11. Some companies cannot pay because their upstream customers have not paid them, and this is particularly relevant where local-government revenues are under pressure and government procurement projects are involved—the upstream payer is the real issue, though not every local official confronts the link between government debt and SME payment problems. [para. 18]
12. The Central Commission for Discipline Inspection and the Finance Ministry recently publicized six cases involving accountability for hidden local-government debt, including one case where Wu Shenghua, serving as Communist Party secretary of Bijie from 2022 to 2025, failed to address debt-reduction work and reportedly said, "Those debts were incurred before I came. Why should I repay them?"—a dangerous mindset that treats old bills as someone else's problem while new liabilities pile up. [para. 19][para. 20]
13. Local governments are the faucet for a large share of contracted work; once they shut off the water, economic activity is thrown into disorder, and delayed payments are often accompanied by pressure to cut prices, which ultimately erodes the economy's own vitality and stifles innovation. [para. 21][para. 22]
14. China should move swiftly to implement the central government's measures, as the policy documents are now in place and what matters is whether they work—if enforced effectively, small businesses and ordinary workers will feel the difference directly, restoring economic and social vitality with the same resolve brought to tackling the "triangular debt" problem of the 1990s. [para. 23][para. 24]
AI generated, for reference only
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