Chinese banks' factoring business amounted to 1.94 trillion yuan in the first three quarters of this year, up 9.6 percent from a year ago, according to data from China Banking Association (CBA) Wednesday.
The total comprised 91.278 billion US dollars from the global market, up 22.37 percent, and 1.36 trillion yuan from the domestic market, up 3.81 percent year on year.
Factoring is a kind of financial transaction and debtor finance in which a business sells its accounts receivable to a third party at a discount.
Currently, China's factoring market has changed into a buyers' market from the past sellers' market given enterprises' rising debts and accounts receivable under the present macro-economic situations, say analysts.
Under such circumstances, Chinese banks are facing increasing risks in handling factoring business when enterprises' growing accounts receivable meant declining asset quality and rising bad debt risks.
To avoid excessive risks, Chinese lenders are generally turning to factoring in industries fundamental to people's livelihood and services industry, which are now less risky than other traditional sectors. After risks started to loom and transfer through industrial chains for some traditional industries, Chinese commercial banks should largely improve their risk control, said Yang Zaiping, full-time vice chairman of CBA.
However, the industry still boasts great potentials for further development. Shi Jie, assistant to president of China Minsheng Banking Corp., Ltd. noted that China's factoring industry was still small in size compared with those in developed countries, not to mention factoring products' financing-centered function design.
In 2014, factoring business volume was equal to 4.7 percent of China's gross domestic product, higher than the global average of 3.64 percent but still much lower than the 13.44 percent and 10.22 percent in Britain and Italy respectively.
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