August 22, 2014 / 11:41 AM / in 4 years

China says factory arrears rising as economy stumbles

BEIJING, Aug 22 (Reuters) - More Chinese manufacturers are falling behind on their payments as economic growth falters, causing accounts receivable to spike 1.1 trillion yuan ($179 billion) in the first six months from the year-ago period, the government said on Friday.

The Ministry of Industry and Information Technology said the 12.7 percent annual jump in accounts receivable between January and June showed how rising arrears was a bigger problem for firms compared with high credit costs and financing difficulties.

Worse, manufacturers have to contend with rising inventories of unsold goods as well which add to their financial woes, the ministry said, adding that the world’s second-largest economy still faced downward pressure.

Inventory levels among manufacturers climbed 12.6 percent in the first six months of this year compared with the year-earlier period. That outpaced the sector’s revenue growth by 4 percentage points, the ministry said in an online statement based partly on feedback from firms and regional governments.

At the same time, factories also struggled with significantly higher financing costs.

Financing costs faced by manufacturers leapt 16.5 percent in the first-half of 2014 from the same period last year, with interest payments climbing 11.2 percent.

Small- and medium-sized companies were the worst hit among companies, the ministry said. Their financing costs jumped 17.5 percent, as interest rates surged by more than 30 percent for many of them.

Financing difficulties among firms arose when banks reduced the sizes of loans, delayed cash disbursements, refused to roll over loans or withdrew credit lines from companies, the ministry said.

Underscoring the wobbles in China’s economy, which has been through a rough patch this year as investment slowed and the property market cooled, bad loans have risen slightly though they remain at a negligible level of 1.08 percent. (1 US dollar = 6.1510 Chinese yuan) (Reporting by Koh Gui Qing; Editing by Robert Birsel)

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