While there is an anticipation of global trade expanding by slightly over 2 per cent in 2024, the pace of growth in Asia is forecasted to remain subdued and may not be as robust as it was in previous years, said a survey by Atradius. Atradius is a provider of credit insurance, bond and surety, collections and information services, with a presence in over 50 countries.
The key factor inhibiting growth can be attributed to an ongoing underperformance in exports, which is likely to continue in the short-term due to weaker demand from Asia’s main export markets, such as the United States and European Union, and could potentially weaken the domestic resilience shown by Asian economies this year.
One illustration of this, Atradius said, is a 6 per cent overall drop in Asian businesses B2B trading on credit over the past year with variations in different markets. Taiwan and Singapore saw significant drops, while China and Vietnam experienced an increase in B2B sales on credit.
According to the findings of the survey of companies polled in China, Hong Kong, Indonesia, India, Japan, Singapore, Taiwan, and Vietnam for the 2023 edition of the Atradius Payment Practices Barometer survey for Asia, Asian businesses’ optimism about their growth prospects becomes clear. The survey revealed that 70 per cent of Asian companies expect rising demand for their products and services in the months ahead.
The survey also revealed a strong commitment among businesses polled in Asia to addressing the challenges posed by deteriorating business-to-business (B2B) payment practices, which are reflective of the vulnerabilities affecting the global economy and marketplace.
“While the landscape varies from market to market, a common denominator is, therefore, the widespread attention Asian businesses place on maintaining strong cash flow and liquidity. Robust measures to mitigate cash flow risks are already evident across various Asian economies, notably in China, Japan, and India,” the report stated.
More than 50 per cent of companies in the region have increased efforts to collect overdue B2B invoices during the past 12 months, a policy complemented in each market by specific credit risk management tactics. These efforts, it added, had a positive impact, with late payments across Asia declining by 12 per cent over the past year, now affecting 44 per cent of all B2B invoiced sales. Bad debts also declined slightly, standing at 5 per cent of all B2B invoiced sales.Companies in Vietnam, Singapore and China reported success in mitigating the impact of late payments.
Andreas Tesch, Chief Market Officer of Atradius, said, “The flexible approach to credit management demonstrated by Asian businesses, which involves trade credit insurance for 47 per cent 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 risk mitigation.”