China issues rules to curb late payments to SMEs, urges big firms to pay within 60 days in cash

Payment delays are a critical concern for small and medium enterprises (SMEs), impacting their healthy development, the optimization of the market competition environment, and the smooth circulation of the national economy. In response, the General Office of the State Council has recently issued the Notice on Strengthening the Governance of Payment Delays for Small and Medium Enterprises (hereinafter referred to as the Notice).

The Notice adopts a problem-oriented approach, targeting the key bottlenecks that cause payment difficulties for SMEs. It proposes 10 specific measures across four areas, based on:

• Improving industry-specific payment rules
• Strengthening oversight of large enterprises' payment behavior
• Regulating the use of non-cash payment instruments
• Enhancing fund transmission efficiency and financing support

Establishing Clear Payment Rules Across Industries

Promoting timely payment within industries and ensuring smooth cash flow for enterprises is essential for improving the resilience and security of industrial and supply chains, as well as modernizing industry governance systems and capabilities. The Notice calls for the establishment of industry-specific payment rules, including:

• Defining reasonable payment periods by industry
• Specifying four key elements of payment
• Guiding large enterprises to cap the maximum payment period at 60 days

Addressing Exploitation of Market Dominance

Vice Minister of Industry and Information Technology, Ke Jixin, noted that most industries have yet to issue specialized settlement and payment rules. Some large enterprises exploit this "loophole" by abusing their dominant market position. They deliberately extend payment cycles for upstream and downstream SMEs by:

• Obscuring the starting point of the payment period
• Delaying acceptance or settlement
• Misusing commercial drafts and electronic accounts receivable vouchers

"The Notice requires relevant industry authorities to develop and improve settlement and payment regulations for their sectors, clearly defining the starting point of the payment period, payment methods and procedures, standards and timelines for inspection and acceptance (or project completion settlement), and the maximum payment period," Ke Jixin explained. These four key elements are targeted and precise. By standardizing them and promoting their inclusion in model contracts, the Notice fills existing gaps in settlement and payment management across industries. This not only sets clear boundaries for large enterprises to pay on time but also gives SMEs clarity on when and how they will receive payment.

Encouraging 60-Day Payment Commitment

The Notice actively encourages large enterprises to reduce the maximum payment period for SMEs to 60 days. Ke Jixin believes that timely payment by leading enterprises will set an example for the entire industry chain. The Notice requires relevant industry authorities to issue timely payment initiatives, guiding leading enterprises to be the first to announce and fulfill a "60-day cash payment commitment." This includes payments made via bank transfers or other instant settlement methods, starting from the date of delivery of goods, services, or project completion.

Monitoring Large Enterprises with High Payables and Ample Cash

The Notice highlights the need to focus on large enterprises with large accounts payable and ample cash assets. Cao Yuanyuan, Director of the Financial Market Department of the People's Bank of China (PBOC), explained that some large enterprises delay payments to suppliers to save financial costs and gain a competitive edge. This not only harms SME suppliers but also exacerbates "involution-style" competition and supply-demand imbalances at the macro level. Public financial data shows that some large enterprises have substantial accounts payable while holding significant cash assets, indicating they have the ability to pay on time but choose not to.

The PBOC is closely monitoring the negative impact of large enterprises' payment delays on the macroeconomy, industrial ecosystems, and SME operations. It is actively advancing inclusive finance to alleviate liquidity pressures on SMEs. As of the end of June 2026, the balance of inclusive small and micro loans reached 38.5 trillion yuan, with an average annual growth rate of nearly 20% since 2020.

Cao Yuanyuan stated that the PBOC will actively cooperate with relevant departments to strengthen governance of large enterprises' payment issues. For enterprises issuing bonds in the interbank market, the PBOC will:

• Enhance disclosure of accounts payable information
• Continue supporting enterprises in replacing accounts payable through loans and bond issuance
• Provide financing便利 for enterprises that significantly reduce payables and payment periods

At the same time, the PBOC will further increase financing support for SMEs, launch special actions for financial support of private and inclusive small and micro enterprises, guide reasonable growth in loan scale, steadily improve loan quality, and maintain stable interest rates and customer quality to enhance the quality and efficiency of inclusive financial services.

State-Owned Enterprises to Lead by Example

Pei Renquan, head of the Financial Supervision and Operation Evaluation Bureau of the State-owned Assets Supervision and Administration Commission (SASAC), stated that central state-owned enterprises will take action in three areas:

• Not defaulting on or delaying payments
• Reducing the use of drafts and increasing cash payments
• Breaking unreasonable industry rules and practices

The goal is to ensure that SMEs are paid in full and on time.