China Default Chain Reaction Looms Amid 192 Day Cash Turnaround
- Cash conversion jumped to record from 125 days five years ago
- Wait increases risks firms can't repay debts, Natixis says
ZHENGZHOU, CHINA - JANUARY 11: (CHINA OUT) A worker counts one-yuan coins at the storehouse on January 11, 2016 in Zhengzhou, Henan Province of China. Mr. Zhang collected over 300,000 one-yuan coins from the coin-operated washing machines he managed, and he wanted to exchange the coins into paper money to pay salary for the workers. However the nearby banks all didn't agree to exchange them into banknotes immediately for the season that the bank could only exchange 2,000 to 3,000 coins per day and they had to confirm the coins were real.
Photographer: ChinaFotoPress/Getty ImagesChinese companies have never had to wait so long to get paid, as stockpiles build and customers delay sending funds.
Firms now take a record 192 days to collect payment for their goods or services from when they pay for the inputs, according to data compiled by Bloomberg on non-financial corporations traded in Shanghai and Shenzhen. The cash conversion ratio is up from 125 days five years ago. Liquidity is tightening in China after company profits declined for the first time in three years and as debtors face their hardest time ever paying interest.