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The coronavirus, credit lines and collection of unpaid invoices

The coronavirus (COVID-19) has been in the news since January. Although China was still surprised at the start of the epidemic by the scale of the problem, it seems to be controlling the virus better and better. However, the coronavirus is now spreading to other parts of the world, and the economic impact is considerable. What are the consequences of this for your credit lines and the collection of unpaid invoices, in China and the rest of the world?

 

China in times of corona

As at the time of SARS (also a coronavirus) in 2002, the source of the epidemic can be traced back to China. But SARS, like the epidemics in recent decades coming from Africa and America, had a smaller impact on the world economy than the impact of COVID-19 will now have. Firstly, because China’s economic role in 2020 is very different from that of China in 2002.

– In 20 years’ time, with phenomenal double-digit growth and a huge population, China’s place in the world economy has been considerably strengthened and in time it could even take the leading role in the world economy (World Bank, purchasing power parity).

– Today’s China is the largest exporter and the second largest importer in the world. China is the main producer of many manufactured goods, which are delivered to the whole world.

 

Economic consequences

To date, more than 89 000 people worldwide have been infected with COVID-19, the vast majority of them are Chinese. About 3000 people have died as a result of the virus, also mainly in China. Because of this large number of infections, China has taken quarantine measures, which prevent many workers from returning to work after the holidays. As a result of the domino effect, many normally operating companies around the world are in trouble as well, as they quickly run out of supplies that are fuelled by China.

TCM Belgium experienced for itself how quickly global stocks are affected: on the 3th of February, TCM China (with some 6000 active employees spread all over China) asked all TCM partners to send them as many mouth masks as possible. However, all suppliers we contacted in Belgium or elsewhere were already out of their stocks of masks. Simply because China is the largest manufacturer of mouth masks, and almost all other producing countries had already sold all stocks (before the export of masks was forbidden to reserve them for their own population).

The problem of sold-out masks is similar to the wide variety of spare parts, finished products, or even services that many international companies are forced to wait for. The press reports many examples of this nowadays.  It is clear that this situation has direct and indirect consequences for companies all over the world. Not only for production companies, but for players in all sectors.

COVID-19 is spreading much faster nowadays than SARS a few decades earlier. Sooner or later, companies around the world will have to deal with sick employees and today’s coronavirus is no longer a distant problem. At the time of writing this article, the virus has even reached Belgium, with 13 known infections on the radar.

 

The collection of unpaid invoices

The coronavirus will cause a lot of financial problems worldwide, probably for a few years.

In average times and situations, the ‘ordinary citizen’ already has numerous and varied reasons not to pay. However, when the debtor no longer has liquid assets, it is almost certain that he will not be able to pay or will not be able to pay quickly. The consequences of the coronavirus will therefore at best lead to a postponement of payment for months or years, and at worst to a loss of prosperity.

To illustrate the diversity of consequences, the virus is also likely to cause problems for debt collection companies: they usually work on commission and will therefore have to work harder to ultimately earn less and much slower.

 

Belgian companies

Belgium exports EUR 7 billion to China, making China the 10th largest export country for Belgian companies.  The coronavirus will throw a spanner in the works for these companies in two ways: on the one hand, the reduction of volume, and on the other hand, payment difficulties.

Belgium imports 15 billion euros from China. These are raw materials, spare parts and finished products. The chemical and textile industries are in the front line. The Belgian companies that depend on these imports will suffer from the volume, the delivery times and the payment possibilities.  This will have an impact on our country’s domestic economy and also on exports.

So it’s probably a good time to look at your stocks, but also at the credit lines you offer and how you set them up.

 

Date: 03/03/2020

 

Do not hesitate to contact us if you have any questions. We are in daily contact with our colleagues from TCM China and other countries.

 

Sources:

 

The coronavirus, credit lines and collection of unpaid invoices

The coronavirus (COVID-19) has been in the news since January. Although China was still surprised at the start of the epidemic by the scale of the problem, it seems to be controlling the virus better and better. However, the coronavirus is now spreading to other parts of the world, and the economic impact is considerable. What are the consequences of this for your credit lines and the collection of unpaid invoices, in China and the rest of the world?

 

China in times of corona

As at the time of SARS (also a coronavirus) in 2002, the source of the epidemic can be traced back to China. But SARS, like the epidemics in recent decades coming from Africa and America, had a smaller impact on the world economy than the impact of COVID-19 will now have. Firstly, because China’s economic role in 2020 is very different from that of China in 2002.

– In 20 years’ time, with phenomenal double-digit growth and a huge population, China’s place in the world economy has been considerably strengthened and in time it could even take the leading role in the world economy (World Bank, purchasing power parity).

– Today’s China is the largest exporter and the second largest importer in the world. China is the main producer of many manufactured goods, which are delivered to the whole world.

 

Economic consequences

To date, more than 89 000 people worldwide have been infected with COVID-19, the vast majority of them are Chinese. About 3000 people have died as a result of the virus, also mainly in China. Because of this large number of infections, China has taken quarantine measures, which prevent many workers from returning to work after the holidays. As a result of the domino effect, many normally operating companies around the world are in trouble as well, as they quickly run out of supplies that are fuelled by China.

TCM Belgium experienced for itself how quickly global stocks are affected: on the 3th of February, TCM China (with some 6000 active employees spread all over China) asked all TCM partners to send them as many mouth masks as possible. However, all suppliers we contacted in Belgium or elsewhere were already out of their stocks of masks. Simply because China is the largest manufacturer of mouth masks, and almost all other producing countries had already sold all stocks (before the export of masks was forbidden to reserve them for their own population).

The problem of sold-out masks is similar to the wide variety of spare parts, finished products, or even services that many international companies are forced to wait for. The press reports many examples of this nowadays.  It is clear that this situation has direct and indirect consequences for companies all over the world. Not only for production companies, but for players in all sectors.

COVID-19 is spreading much faster nowadays than SARS a few decades earlier. Sooner or later, companies around the world will have to deal with sick employees and today’s coronavirus is no longer a distant problem. At the time of writing this article, the virus has even reached Belgium, with 13 known infections on the radar.

 

The collection of unpaid invoices

The coronavirus will cause a lot of financial problems worldwide, probably for a few years.

In average times and situations, the ‘ordinary citizen’ already has numerous and varied reasons not to pay. However, when the debtor no longer has liquid assets, it is almost certain that he will not be able to pay or will not be able to pay quickly. The consequences of the coronavirus will therefore at best lead to a postponement of payment for months or years, and at worst to a loss of prosperity.

To illustrate the diversity of consequences, the virus is also likely to cause problems for debt collection companies: they usually work on commission and will therefore have to work harder to ultimately earn less and much slower.

 

Belgian companies

Belgium exports EUR 7 billion to China, making China the 10th largest export country for Belgian companies.  The coronavirus will throw a spanner in the works for these companies in two ways: on the one hand, the reduction of volume, and on the other hand, payment difficulties.

Belgium imports 15 billion euros from China. These are raw materials, spare parts and finished products. The chemical and textile industries are in the front line. The Belgian companies that depend on these imports will suffer from the volume, the delivery times and the payment possibilities.  This will have an impact on our country’s domestic economy and also on exports.

So it’s probably a good time to look at your stocks, but also at the credit lines you offer and how you set them up.

 

Date: 03/03/2020

 

Do not hesitate to contact us if you have any questions. We are in daily contact with our colleagues from TCM China and other countries.

 

Sources:

 

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