China’s cut-throat price competition is increasingly shifting the financial burden of manufacturing onto smaller suppliers, who are forced to navigate delayed payments that weaken overall supply chain stability. In the electric vehicle sector, an investigation conducted by Economic Observer in September 2026 examined financial data from 14 automakers, finding that their average accounts-payable and notes-payable turnover period surged from 164.4 days at the end of 2025 to 187.5 days during the first half of 2026. This trend forces many suppliers to take on debt just to cover essential production inputs and labor costs.
While 17 major vehicle manufacturers committed last year to limiting payment periods to 60 days, Beijing intervened in September 2026 with new regulations to govern payment practices. Data from the China Association of Automobile Manufacturers suggests these rules may be yielding results, with the average payment period dropping to 54 days—a 10-day improvement over the previous year. However, analysts note that the industry association and the Economic Observer utilize different metrics. The association tracks time from invoice acceptance to payment, while financial statement data often includes acceptance bills and may exclude unsold inventory costs, potentially inflating the reported wait times. Regardless, suppliers frequently receive non-cash financial instruments instead of immediate payment, with further delays caused by inspection and invoice processing times.
This phenomenon extends beyond the automotive industry. During a September 14 government briefing, Cao Yuanyuan, director general of the People’s Bank of China’s Financial Market Department, acknowledged that large companies with significant cash reserves are delaying payments, effectively transferring financing costs to smaller, less capitalized firms. Some large companies issue digital promises to pay later, which suppliers must then present to banks for loans—a practice occasionally exploited to charge suppliers financing fees while postponing cash outflows.
By July 2026, outstanding digital certificates had reached 2.4 trillion yuan, down from a peak of 3 trillion yuan, with average payment periods for these instruments falling to 92 days. Across the broader manufacturing sector, large industrial firms reported 29.77 trillion yuan in accounts receivable by the end of September 2026, a 10 percent year-on-year increase, with an average collection period of approximately 72 days. These delays stifle growth and innovation among smaller manufacturers, as they are often forced to accept unfavorable contract terms to retain large customers.
Chinese officials are attempting to address these imbalances. New automotive regulations require most materials to be inspected within three working days, restrict the forced use of certain non-cash payment instruments, and encourage 30-to-60-day payment cycles for smaller suppliers. A State Council directive has also called for broader oversight of electronic certificates and greater scrutiny of large companies with substantial payables. Despite these efforts, enforcement remains difficult in highly competitive markets where firms may resort to aggressive price negotiations to lower costs, further damaging supplier financial health. For international companies, these cash flow issues present operational risks, as even capable suppliers may lack the liquidity to scale or invest in necessary improvements to meet global demand.
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Why does this matter? True, longer payment periods require suppliers to borrow and pay financing costs, but suppliers also may have to postpone growth and innovation. Suppliers may also be forced to accept less favorable contract terms to keep large customers. This is detrimental to industries that rely on smaller manufacturers in particular, since postponing supplier payments reduces the capabilities of the supplier pool.
