China forces automakers to settle with suppliers faster
China has tightened requirements for automakers to settle accounts with suppliers, trying to reduce financial pressure on parts manufacturers after a multi-year price war in the world's largest automobile market. For small and medium suppliers, companies are recommended to pay within 30 days, and the maximum period should not exceed 60 days.
The new rules were jointly introduced by China's Ministry of Industry and Information Technology and the State Administration for Market Regulation. They are intended to close loopholes by which automakers formally complied with promised payment deadlines but could actually delay the start of their counting.
Chinese regulators explain the tightening of rules by the fact that excessively long settlement periods have become one of the manifestations of irrational competition in the automotive industry. This practice shifts the financial burden from large automakers to suppliers, primarily small and medium enterprises, and creates risks for the entire production chain.
Beijing closes payment deadline loopholes
One of the main changes is clearer rules for determining the moment from which the payment period starts. Automakers must accept standard components and other production materials, as a rule, no later than three working days.
For parts that must be installed on the vehicle and additionally inspected, this period is up to five working days. After acceptance, the agreed payment period begins.
The period specified in the contract with the supplier must not exceed the period that the automaker has publicly promised to observe. If a company delays payment, it must pay the statutory interest.
Special attention was paid to small and medium suppliers. Automakers are encouraged to settle with them within 30 days after product acceptance, and in any case to complete payment within 60 days.
Automakers banned from shifting financing to suppliers
Beijing also wants to reduce the use of schemes under which suppliers receive various debt instruments instead of money. Companies must not force counterparties to accept commercial bills, supply chain financing instruments, or other non-cash forms of settlement.
For small and medium enterprises, regulators recommend maximum use of cash payments. If the contract does not separately specify the method of settlement, such suppliers must be paid in cash, not with commercial bills or electronic confirmation of receivables.
Separate rules are also introduced for cases when the car manufacturer and the supplier are still disputing the final price of components. For uninterrupted supplies, the automaker must pay in advance, as a rule, at least 90% of the price of the last effective contract.
If supplies are not continuous, the advance payment must be at least 70% of the average industry price or a predetermined cost of the part. Final settlement will be made after the price is agreed.
Price war hit suppliers
The tightening of regulation comes after a multi-year price war in the Chinese auto market. In conditions of tough competition, manufacturers not only lowered car prices but also tried to cut their own costs as much as possible and hold onto suppliers' funds longer.
In the past, settlement periods of some Chinese automakers with suppliers could approach a year. After Beijing's intervention, the situation has changed noticeably: a study by the China Association of Automobile Manufacturers among 17 large companies showed that the average payment period fell to about 54 days, and four manufacturers paid in less than 50 days.
Back in 2025, the 17 largest Chinese automakers pledged to limit settlement periods with suppliers to 60 days. However, the authorities acknowledged that companies interpret the start of the countdown, the acceptance procedure, and acceptable payment methods differently. The new rules are intended to unify these practices.
Violators will be monitored separately
Automakers must report to the Ministry of Industry and Information Technology twice a year on the status of settlements with suppliers. In addition, independent organizations will annually check the payment practices of key companies, and the evaluation results are planned to be published.
Companies with large volumes of overdue accounts, intentional delaying of deadlines, or a significant number of supplier complaints may be summoned for joint negotiations with regulators and required to eliminate violations. In cases of violation of the law, the authorities promise to apply stricter sanctions.
Thus, Beijing is trying not just to reduce payment terms, but to change one of the key financing models of the Chinese auto industry, in which part of the costs of price competition were actually borne by manufacturers of parts and components.
Based on materials: Bloomberg, Ministry of Industry and Information Technology of China
