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© AFPAs economy continues to cool in China, payment cycle has been extended and companies are finding it harder to get paid for their goods and services.
As China's economy continues to cool, companies are waiting longer and finding it harder to get paid for goods and services they have already sold, leading to record amounts of receivables - and potential write-offs - on corporate balance sheets.

At Longyuan Construction Group, an eastern China builder of high-rise offices, apartments and highways, receivables last year inched up 4.9 per cent to 4.1 billion yuan (HK$5.1 billion), while average collection times extended to 95.2 days, compared with 76.3 days for 2011.

Slow collection of money owed is causing Longyuan to delay its own payments to steel and cement suppliers, said Zhang Li, the company's board secretary, in a ripple effect being repeated across the economy.

"If you don't pay me and I pay others, aren't I just a sucker?" asked Zhang.

"I'm not that stupid."

A Thomson Reuters survey of data on China's more than 2,300 listed firms illustrates the impact on corporate payments, with company receivables - the accounting term for money owed by customers - on average reaching US$160.49 million at the end of last year, more than double the US$65.9 million average at the end of 2009.

"It's a pretty loud warning bell," said Paul Gillis, an accounting professor at Peking University. "Companies cannot pay off their receivables in a slowing business cycle. Some of these receivables may not get paid, which means you'll see a lot of write-offs in the future."

As a downturn in the property market gathered pace late last year, four years after Beijing began introducing cooling measures, payments to builders and materials suppliers slowed.

Unpaid bills among construction companies, cement makers and related firms are now creating interlocking, triangular debt that stretches across broader parts of the economy.