China’s industry ministry opens complaint platform for auto suppliers about payment issues

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SHANGHAI (Reuters) -China’s industry ministry said on Wednesday that it would accept complaints from auto suppliers if major Chinese automakers fail to honor their commitment to timely payments, aiming to address suppliers’ concerns over loopholes in payment regulations.

The Ministry of Industry and Information Technology launched an online platform allowing suppliers to report automakers that set payment periods in procurement contracts longer than 60 days, delay payment by postponing product inspections or acceptance certificates without valid reasons, or compel medium- and small-sized suppliers to accept non-cash payments, it said in a statement.

Tension has been high in China’s auto industry as the price war which began in early 2023 has shown little sign of abating.

Seventeen Chinese car manufacturers pledged in June to make payments to suppliers within 60 days, responding to a recent outcry from material makers including steelmakers over prolonged payment times as the backlash to a punishing price war grows.

Chinese authorities issued new rules in March that require big companies to settle most payments with suppliers within 60 days, effective on June 1. 

Even so, suppliers had voiced concerns over potential loopholes in these regulations, seeking clarity on whether payments would be made in cash or commercial paper and on the criteria for determining the start of the 60-day payment period.

Commercial paper has been commonly used in the property sector, popular among developers because it is not categorised as interest-bearing debt. It promises suppliers a payment on a future fixed date, usually within one year, though the suppliers sometimes sell the paper before maturity at a discount in the secondary market.

(Reporting by Zhang Yan, Brenda Goh; Editing by Chizu Nomiyama )