China acts to tackle scourge of late payments of SMEs

The Chinese government has introduced revised regulations to tackle the scourge of late payments, guaranteeing payments owed to small and medium-sized enterprises (SMEs).

The revised regulation, which took immediate effect and is now in force, will help strengthen the legal protection for private enterprises, mostly SMEs, further optimize the business environment and enhance fair participation in market competition, said market experts and leading company executives.

According to the new regulation, large enterprises are required to pay SMEs within 60 days of delivery of goods or services. Other revisions require detailing work responsibilities, improving supervision and enhancing punishments for illegal activities.

Nie Xianzhu, vice-president of the China Association of Small and Medium Enterprises, said the revised regulation has further raised awareness of the “crippling issues” faced by SMEs. He said: “The problem-oriented and targeted approach will help relieve the capital pressure on SMEs and stimulate their endogenous driving force and vitality.”

Collecting long-overdue payments is a major difficulty hindering the development of SMEs, Nie said, adding that the problem stems from the declining payment capability of enterprises amid a sluggish global economy, lacklustre demand and fiscal pressures at various government levels.

Meanwhile, large enterprises often place payments owed to SMEs low on their funds priority list, Nie added. He said: “In the broader context of pursuing progress while maintaining stability, helping SMEs resolve difficulties is an effective way to stabilize overall growth.”

According to data from the National Bureau of Statistics (NBS), the accounts receivable of major industrial enterprises hit 25.86 trillion yuan ($3.6 trillion) at the end of April, up 9.7% year-on-year, while the average collection period for accounts receivable was 70.3 days, a year-on-year increase of four days.

Li Hongjuan, deputy director of the Private Economy Research Office at the Economic System and Management Institute, which is part of the National Development and Reform Commission, said the revised regulation reflects the government’s strong attention to the issues of arrears owed to SMEs.

“It clarifies the responsibilities of the government and relevant departments, strengthening accountability and coordination,” she said. “Also, it shortens the payment period and standardizes payment practices, addressing the root causes of arrears. It precisely regulates pain points such as hidden contract terms.”

Li said SMEs were an important part of the national economy and social development, serving as a key pillar for stabilizing employment, improving people’s livelihoods and reviving economic growth.

Private companies, mostly SMEs, contribute over 60% of China’s GDP, 70% of technological innovation and 80% of urban employment, NBS data shows.

The government is also taking steps to promote sustainable development in the private sector.

China’s first all-encompassing law focusing on promoting the private economy took effect on May 2025, when the government issued a guideline for stepping up financing support for micro and small enterprises.

Business leaders welcomed Beijing’s intensified efforts to support the development of the private sector, expecting to see more detailed supporting measures to ensure effective implementation.

“The regulation plays a significant role in boosting the confidence of businesses,” said Cheng Shuqing, Party secretary of Beijing-based Pan-China Group.

Ye Lin, a professor at Renmin University of China Law School, called for more efforts to improve the long-term mechanism for resolving SME payment arrears. “More efforts are needed to ensure that the asserting rights of SMEs are not affected during their future business operations,” he said.

China to be responsible for 25% of global growth in 2025

China is expected to contribute around a quarter of global growth this year,” according to Marshall Mills, senior resident representative of the International Monetary Fund in China.

In an interview at the 2025 Tsinghua PBCSF Global Finance Forum, Mills said there might be an upward revision of the fund’s 2025 economic growth forecast for China if recent tariff rollbacks and strong first-quarter growth momentum are maintained.

“With these positive developments, there is a potential upside. We’ll have to look at all the factors together and provide an updated forecast in due course,” Mills said, adding that the first-quarter results of China’s economic growth were “a welcome, positive surprise”.