China is full of debt 3》Cement shipments are one year in arrears, state-owned enterprises default on debt more severely than BYD
Quick Look
- Data from the National Bureau of Statistics of China show that the balance of accounts receivable of industrial enterprises above designated size reached 28.88 trillion yuan at the end of July 2026, and the average recovery period extended from less than 40 days to nearly 72 days.
- The total accounts payable of the five major state-owned infrastructure construction giants, including China State Construction Engineering Corporation, China Railway, China Railway Construction, China Communications Construction and China Metallurgical Corporation, totaled 3.36 trillion yuan, of which China Railway's turnover days were 337 days and MCC's was 438 days.
- When central enterprises default on project payments, they often settle with long-term commercial acceptance bills or electronic vouchers.
AI-generated summary
Why It Matters
According to data from the National Bureau of Statistics of China, the balance of accounts receivable of industrial enterprises above designated size reached 28.88 trillion yuan, and the average recovery period extended from less than 40 days to nearly 72 days. The collapse of land finance has led to the depletion of local urban investment platforms' finances and their inability to pay project fees to central enterprises.
(AI synthesis diagram)
[Reporter Gao Jiahe/Comprehensive Report] According to the latest data from the National Bureau of Statistics of China, by the end of July 2026, the balance of accounts receivable of industrial enterprises above designated size has soared to 28.88 trillion yuan (the same below; approximately NT$126 trillion), and the average recovery of corporate accounts receivable The collection period has been significantly extended from less than 40 days to nearly 72 days. Compared with the 1990s, this wave of "new triangular debt" has increased to central enterprises (state-owned enterprises under the direct jurisdiction of the central government), and the default methods are even more severe than BYD's "Dian Chain", a private enterprise required to be reviewed by the policy.
According to the financial report for the first half of 2026, the five major state-owned infrastructure giants, including China State Construction Engineering Corporation, China Railway, China Railway Construction, China Communications Construction and China Metallurgical Corporation, have a total "accounts payable" on their books of 3.36 trillion yuan, which is much higher than Evergrande Group's total liabilities of 2.44 trillion yuan. Among them, China Railway's accounts payable turnover days are about 337 days, and MCC's account payable turnover days are astonishing 438 days, which means that after the ground-floor contractors transport the cement to the construction site and issue invoices after completion, they have to wait on average for more than a year before they can get their own money.
Please read on...
China's state-owned infrastructure enterprises have defaulted on project payments to downstream small and medium-sized enterprises, which is even worse than BYD's previous "DIChain (supply chain financial electronic voucher)" model that caused huge controversy. When state-owned enterprises default on project payments, they often no longer pay cash, but instead issue "commercial acceptance bills" or "electronic vouchers" issued by themselves with a term of up to half a year or even a year; the average accounts payable turnover days of state-owned construction enterprises often exceed 300 or even 400 days, etc. Because it occupies the funds of small and medium-sized enterprises for free for more than a year; BYD only has a monthly credit period of 30 to 60 days plus a 6 to 8-month Dilian settlement model, and the payment cycle is extended to 8 to 10 months. The new energy vehicle giant BYD is somewhat more "conscience" than these central banks.
If private enterprises urgently need cash to pay wages, they can only be forced to go to factoring companies or financial platforms affiliated with central enterprises for "discounting." Central enterprises not only occupy the funds of small and medium-sized enterprises for free, but also earn financial fees by "extra layer" of discount interest rates.
The source of the new type of triangular debt is the collapse of "land finance". In the past decade or so, China's Local Government Urban Investment Platform (LGFV) has relied on revenue from land sales to carry out infrastructure construction. However, as the housing market collapsed and local finances dried up, urban investment companies were unable to pay project fees to central enterprises. In order to maintain the book revenue scale and market share, they also catered to the central government's "guarantee growth" In order to meet the political task of "long-term and new infrastructure", these central or state-owned enterprises can only continue to take on projects with no hope of repayment, and then "pass down" the pressure of capital disconnection to private enterprises; the ultimate consequences are that enterprises will lose money and close down, the unemployment of migrant workers will increase, consumption will shrink, and China's domestic demand will continue to cool down.
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What to Watch
AI outlook — possibilities, not facts
The accounts payable turnover days of central enterprises will continue to remain high in the next few months unless land finance is restored or the central government intervenes to coordinate.
Likely · Within months
The cost of discounting cash for small and medium-sized enterprises through factoring companies affiliated with central enterprises will continue to compress their profit margins.
Likely · Within months
Open Questions
- Will the central government issue policies to alleviate the accounts payable problem of central enterprises?
- How much money can small and medium-sized enterprises actually get after obtaining cash through discount?
- Will this break in the capital chain spread to other industries?
