Coface, an international credit insurance and management services group, yesterday said that it may soon take Taiwan off its list of countries with a negative outlook for credit default risk if the nation’s export-oriented economy continues to gain ground.
“We may consider, early next year, taking Taiwan off the negative list,” Richard Burton, regional managing director of Coface in greater China, told a media briefing in Taipei yesterday.
He said that the local economy has shown green shoots, boosted by a rebound in Chinese demand and a large fiscal stimulus, although exports remain weak on a year-on-year basis.
There are also doubts about the sustainability of China’s stimulus measures, which may offer only a one-off boost to the local economy, he said.
The country was assigned a relatively “good rating” of A2. However, this is the same category Hong Kong and Singapore were assigned with negative implications, Xavier Farcot, deputy regional managing director of Coface in greater China, told yesterday’s media briefing.
There are only three countries in the world with a top-notch A1 rating, while China places one notch lower at A3, he said.
The nation’s payment default index has fallen from its recent peak of around 120 points in December last year to 97 this June while the world’s default index increased to around 210 points since June 2007 with no signs of declining, Burton added.
Meanwhile, the company’s survey showed yesterday that 80 percent of 248 interviewed companies, of 19,000 companies it approached, have adopted credit management measures in their daily operation.
However, 70 percent of small and medium-sized companies with sales of less than NT$50 million (US$1.5 million) would be vulnerable to credit risks since they have not taken any credit risk measures, Farcot said.
The survey also found that 86 percent of responding companies said that they used open accounts as a major payment method because of market competition, while 70 percent averaged a credit period of between 60 and 90 days.
That was longer than the average credit period of 30 to 60 days adopted by 80 percent of surveyed Chinese companies, the poll showed.
Taiwan may suffer less serious overdue payment problems when compared with China. but Farcot warned domestic companies dealing with Chinese buyers of liquidity risk as greater difficulties arise when repaying suppliers if Chinese buyers keep delaying payments.
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