WFY’25: Factoring in China continues to expand in 2024

Chris Wohlert, Managing Director of Supply Chain Finance at Wells Fargo Bank, N.A., discusses the latest developments in China’s factoring market in the regional article featured in the most recent edition (2025) of the World Factoring Yearbook (WFY’25).
Below is an excerpt from this excellent article.

Factoring in China has continued to expand and develop, broadly embracing the country’s combination of technology and deep industrial supply chain expertise. This continued advancement is being achieved with strengthening government support for the development and expansion of supply chain finance in the face of economic challenges posed by global trade disruption, the real property sector and slowing GDP. Industry regulation continues to evolve and mature, requiring firms to improve governance to maintain licences. Advanced technology, including the establishment of supply chain finance (SCF) platforms, deepening usage of blockchain and rapid advancement of artificial intelligence across firms, is being leveraged to develop innovative usage of factoring tools to support SME financing, including deep tier supply chain finance, as well as to broadly support industry.

Factoring Industry Environment
China’s GDP grew 5.0 per cent in 2024, representing a further slowing of the overall growth rate (2023: 5.2 per cent). This continues the trend of continually slowing growth rates, following three decades of world leading economic expansion and this trend is expected to go on with growth rates slowing to a forecasted 3.4 per cent by 2028[1]. China’s private consumption as a percentage of GDP continues to be a focus for expansion as part of the government’s efforts to rely more heavily on domestic demand, given the challenging external environment. Online sales grew 6.5 per cent during the year and now account for 26.5 per cent of total retail sales of consumer goods. Inflation continues to be well contained, in contrast to other major economies. The Consumer Price Index (CPI) grew 0.2 per cent (consistent with the previous year), far below the three per cent government target (recently reduced to 2 per cent for 2025) while the Producer Price Index (PPI) continued to showing a decline of 2.2 per cent confirming the negative trends of the previous year.

The lukewarm but mixed macro-economic environment was also reflected in enterprise business activities. According to the CEIC Data[2], by the end of December of 2024, the balance of bills and account receivables of industrial enterprises with revenue higher than EUR 2.5m was RMB 26.1tn, an increase of 9.87 per cent compared to 2023. In the meantime, the average account receivables (AR) days sales outstanding (DSO) in 2024 was 64.1 days, an increase of 3.5 days over 2023. Notably, amongst all firms, gross revenue continued to expand by 2.1 per cent while continuing to show reduced overall profits as total profits declined by 3.3 per cent. The declining overall profitability was not uniform across industries – commodity and heavy industry (particularly, mining) generally reported significant declines, while consumer and retail oriented industries tended to report modest growth[3].

According to the Atradius 2024 Payment Practices Barometer[4], Chinese firms continue to extend terms through accounts receivable, with the average term at 40 days – but are increasingly focused on DSO management as an important element in managing overall cash flow. Overall, the percentage of uncollectible receivables reverted to the lower end of the three per cent to four per cent range reported historically, with energy/fuel businesses hit the hardest. Firms have strengthened their strategic credit risk management practices, starting to shift away from in-house management to a greater adoption of using trade credit insurance. Of particular note, invoice financing is reported as the main source of financing used by the companies surveyed over the previous twelve months.

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To read the whole article and 42 other specialist articles and country market reviews, order World Factoring Yearbook here.

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[1] CEIC Data. https://www.ceicdata.com/en/indicator/china/forecast-real-gdp-growth
[2] CEIC Data. https://www.ceicdata.com/en/china/industrial-enterprise/industrial-enterprise-account-receivable
[3] National Bureau of Statistics. https://www.stats.gov.cn/english/PressRelease/202502/t20250210_1958649.html
[4] Atradius, (2024, Sep). Credit confidence: Chinese firms report improved B2B payment trends. https://atradiuscollections.com/global/knowledge-and-research/reports/b2b-payment-practices-trends-china-2024