In-Depth Analysis: Behind the New 60-Day Payment Period Rule, Who Is Actually Financing Suppliers?
Hello everyone, I'm your financial journalist. Today, we're not talking about the simple issue of large companies failing to pay their debts, but about a significant shift in capital flow within China's manufacturing sector.
In September 2026, the Ministry of Industry and Information Technology, along with other departments, further refined the payment period management for automobile suppliers. This time, it's not just about requiring payments to be made within 60 days; they also addressed issues related to acceptance, the start of the payment period, payment methods, and even discount costs.
Many people might ask, "Isn't it just about urging payment? Why complicate the process so much?"
The answer is: It's crucial.
Because the money involved is no longer just a simple payment for goods; it has become a powerful financing tool within the supply chain. In the past, suppliers acted like "free banks," funding large companies. Now, banks and financial institutions have entered the picture. Who will actually pay for this money? Who will bear the interest? And whose debt will it be? These factors directly determine the survival of the companies and their stock prices.
Below, I'll break down this issue into five key aspects to help you understand the underlying logic of this "payment period revolution."
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I. Core Summary: From "Delinquency" to "Financing" – The Rules Have Changed
In one sentence:
In the past, the problem with payment periods was that large companies delayed payments while suppliers waited patiently. Now, suppliers sell their IOUs to banks, which wait on their behalf. Large companies may still delay, but the nature of the interest and debt has changed.
Key Changes:
1. Separation of Time: The time when suppliers receive payment is completely separated from when large companies make payments.
2. Shift in Roles: The role of financing has shifted from suppliers to financial institutions (banks/factoring companies).
3. Costs Made Explicit: What used to be hidden costs within procurement processes has now become clearly stated interest and interest-bearing debt.
4. Enhanced Regulation: Regulations no longer focus solely on the number of days payment is made; they look at how the payment is made, who bears the interest, and what type of debt it is.
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II. Breaking Down the 60-Day Rule: Understanding the Hidden Capital Flows
1. Revealing the Reality: Suppliers Are More Than Just Suppliers – They're Also “Free Banks”
Let's look at the numbers: In 2020, the accounts receivable of industrial enterprises above a certain size were 16.41 trillion yuan. By July 2026, this figure had soared to 28.88 trillion yuan. Even more alarming, the growth rate of accounts receivable (67%) far exceeded the growth rate of operating income (31%).
What does this mean? It means that companies are increasingly making money not by selling goods but by delaying payments. For large state-owned construction companies and manufacturing firms, the amount of money they owe to suppliers even exceeds their short-term bank loans.
- Simple Example: Suppose you own a restaurant, and your supplier delivers ingredients, agreeing to payment in three months. During those three months, you use the money from the supplier to renovate, pay employees, or invest in other businesses. The supplier is essentially lending you money for free.
- The Problem: This "free lunch" can't continue forever. Suppliers also need to pay their employees and purchase raw materials. If everyone does this, the supply chain will break down. Therefore, regulation is necessary to bring this hidden form of financing to light.
2. Mechanism Analysis: Who Is Waiting on Behalf of Suppliers Now That Banks Are Involved?
Previously, after delivering goods, suppliers could only wait for 60 or 90 days to get paid. Now, "supply chain finance" has emerged. The process is as follows:
1. Suppliers deliver the goods and receive an "electronic IOU" (an electronic record of the accounts receivable).
2. If suppliers don't want to wait 60 days, they sell the IOU to a bank or a factoring company.
3. The bank deducts a fee (the discount cost) and gives the cash to the supplier in advance.
Here's the huge mismatch:
- Suppliers: Receive cash in advance, improving their liquidity.
- Banks: Bear the risk of waiting and earn interest.
- Large Companies: Their accounts still show "accounts payable," but the actual payment time may be extended (e.g., from 60 to 120 days).
Data Support: In 2025, the financing balance of electronic accounts receivable reached 2.08 trillion yuan. For example, China Railway had 165.3 billion yuan in financing arrangements for suppliers, of which 120.6 billion yuan was taken by the suppliers from banks.
This means: Although the financial reports show that the company still owes money to suppliers, the suppliers actually received the money from the banks, not directly from the company.
3. The Cost Trap: Who Bears the Interest? Is This Really a Good Deal?
Many think that suppliers getting cash in advance saves the companies money, but they're wrong. There's a big catch: Who bears the discount cost (the interest)?
There are mainly three scenarios:
1. Suppliers bear it: Suppliers pay the interest to get the money faster. This improves their liquidity but reduces their profits.
2. Large Companies bear it: Large companies recognize that the money comes with a cost and no longer consider it a free benefit.
3. Both parties share it: The cost is split equally.
Why do the new regulations include the discount cost as a restriction? To prevent large companies from shifting the interest burden onto weaker suppliers. If suppliers have to pay high interest to get cash, their profits will be reduced, potentially leading to lower product quality or even market exit.
4. The Mystery in Financial Reports: The Same Money, Different Classifications on the Balance Sheet
This is what confuses investors the most. After suppliers finance in advance, does the debt on large companies' balance sheets still appear as "accounts payable" or as "bank loans"? The answer depends on whether the company gets additional payment time.
Let's look at three real examples:
- Case 1: Remaining as “Accounts Payable” (Ningde Times Model): The supplier gets financing from a bank, but Ningde Times still pays the bank on the original schedule. Its accounts payable remain at 57.7 billion yuan, indicating no change in its debt structure (operating debt, usually interest-free).
- Case 2: Becoming “Short-Term Loans” (Haier Smart Home Model): The bank pays the supplier on behalf of Haier, and Haier repays the bank later. The amount moves from accounts payable to short-term loans, increasing the company's interest-bearing debt.
- Case 3: Becoming “Long-Term Payables” (China Railway Model): The financing period is extended to 1-3 years, and 6 billion yuan in supplier financing is classified as long-term payables, increasing the company's long-term debt burden.
Implication for Investors: Don't just see a decrease in accounts payable and assume the company's cash flow has improved. Check whether the decrease is due to an increase in short-term or long-term loans. If so, it means the company has just shifted its debt from suppliers to banks, potentially at a higher cost.
5. Future Differentiation: Three Types of Companies Under the New 60-Day Rule
When suppliers no longer want to fund indefinitely, and banks are reluctant to lend indefinitely, the true strength of companies will be revealed. In the future, companies will be categorized into three types:
- Type 1: True Cash Kings (Strong Cash Flow): Industry leaders with substantial profits and ample cash. They can pay in advance, relying neither on supplier funding nor bank loans. The new rules have minimal impact on them, and they may even get lower financing costs due to their good reputation.
- Type 2: Credit-Strong but Cash-Strapped: Large state-owned or leading companies that use their credit to obtain loans from banks. Their financial expenses may increase, but they can continue to expand.
- Type 3: In Trouble (Weak Cash, Difficult Financing): Small and medium-sized manufacturing companies or those with high leverage. They face significant risks, such as broken supply chains, reduced inventory, halted expansion, layoffs, or even bankruptcy.
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III. Tips for Ordinary People: How to Understand “Payment Periods” in Financial Reports
1. Don’t Just Look at Accounts Payable: If a company's accounts payable decrease significantly but its short-term or long-term loans increase, it likely means it has shifted its debt from suppliers to banks, potentially increasing financing costs.
2. Examine the Match Between Operating Cash Flow and Net Profit: High net profit but poor operating cash flow indicates that money is tied up in accounts receivable (owed to others) or accounts payable (owed to others). The new rules will squeeze out this artificial prosperity.
3. Be Cautious of Companies with High Growth, High Accounts Receivable, and High Accounts Payable: Rapid revenue growth but even faster growth in accounts receivable and accounts payable suggests the company is relying on delayed payments. Tighter payment periods can lead to financial problems.
4. **Understand the deeper Meaning of “Anti-Involution”: In the past, companies competed by offering low prices and long payment periods. Now, the focus is on who has stronger cash flow and lower financing costs. Companies that relied on supply chain credit will face greater challenges.
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Conclusion
The new 60-day payment period rule is about controlling the distribution of funds within the supply chain, not just the timing of payments. It marks the end of the era where large companies could use suppliers' funds for free. In the future, only those with real cash flow and healthy financing structures will survive. For investors, it's time to stop overestimating the bargaining power of large companies and focus on their ability to generate cash. For companies, relying on supplier funding for expansion is no longer viable; genuine profitability is the key to survival.