On September 14, Pei Renquan, head of the finance management and operation bureau of China's State-owned Assets Supervision and Administration Commission (SASAC), presented the commission's new "Notice on Strengthening the Governance of Difficulties in Repayment to Small and Medium-sized Enterprises" at a regular policy briefing held by the State Council Information Office. The notice sets binding requirements for central state-owned enterprises to settle invoices from smaller suppliers on time, according to Gasgoo.
What the new rules require
The notice is the latest attempt by Chinese authorities to address a chronic problem in the domestic economy: large companies delaying payment to their small suppliers. Pei said central SOEs will treat cash payments to SMEs as a hard performance indicator and will actively raise funds to guarantee timely settlement. They should also maintain a reasonable cash payment ratio to large enterprise suppliers, so that good payment habits are passed along the entire industrial chain.
The directive explicitly prohibits opening bills of exchange with maturities longer than six months. Bills of exchange are widely used in China as a deferred payment instrument, allowing buyers to hold onto cash while suppliers wait for settlement, often for several additional months or until the bill matures. Suppliers can convert the bill into cash earlier, but only by paying a discounting fee. The six-month cap is intended to shorten the wait for smaller companies that lack the financial buffer to absorb long delays.
The notice also urges central SOEs to specify four key contract terms in advance and to actively follow industry-level initiatives on timely payment. The four terms were not detailed in the public announcement.
Impact on auto suppliers
The automotive industry is particularly sensitive to payment terms. A typical car is assembled from thousands of components supplied by a layered network of companies, including small machine shops, material processors and parts makers that often operate on thin margins and limited access to cheap financing. For those companies, late payment from a large customer can mean delayed wages, difficulty buying raw materials, or an inability to invest in new tooling and production lines.
By pressing central SOEs to pay faster and cap bill maturities, the policy could shorten the cash-conversion cycle for suppliers and reduce their financing costs. Gasgoo noted that the policy landing will have a positive effect on the capital turnover of auto parts suppliers, many of which are small and medium-sized enterprises that have been squeezed by long payment cycles for years.
The automotive industry is also in the middle of a costly transition to electric vehicles, with suppliers investing heavily in new battery, motor and electronics production capacity. Smoother cash flow could help those smaller suppliers fund such investments without taking on burdensome short-term debt.
The policy extends a pattern of government intervention to protect small businesses from the payment power of large enterprises, and it applies to central SOEs across all sectors. Whether the rules will be strictly enforced remains to be seen, but the signal is clear: central SOEs are expected to act as models for the rest of the market, and the discipline is likely to spread through the supply chains that depend on them.
