Chinese regulators introduced stricter rules on Monday governing payments by automakers to suppliers, seeking to close loopholes in a voluntary commitment to settle bills within 60 days and ease pressure on smaller businesses.
Major Chinese automakers pledged last year to pay suppliers within 60 days after complaints from steel producers and other suppliers over lengthy payment cycles. However, the Ministry of Industry and Information Technology (MIIT) said payment periods in China remained longer than those of major multinational carmakers and still needed improvement.
The new rules require automakers to establish clearer starting points for payment calculations and set deadlines for product acceptance procedures, which can be used to delay payments. Regulators also encouraged faster cash settlements, particularly for small and medium sized suppliers.
The rules extend beyond parts procurement to cover engineering and service providers. Automakers are also discouraged from forcing suppliers to accept commercial bills, supply chain notes or other non cash payment instruments instead of direct payment.
The measures come as Chinese authorities seek to curb an intense price war in the world’s largest auto market, where aggressive price cuts have increased pressure on manufacturers and their suppliers.
The MIIT, the State Administration for Market Regulation and other agencies will conduct regulatory interviews with automakers that have large unpaid supplier balances, are suspected of deliberately extending payment periods or receive repeated complaints from smaller suppliers.
Companies identified as problematic will be required to rectify their practices, while those found to have broken laws or regulations could face penalties, regulators said.
Automakers will also be required to submit supplier payment reports twice a year and annually, while regulators will publish yearly assessments by third parties to strengthen oversight.
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