Taiwan: export-focused businesses express caution

Introduction

The negative impact on global trade caused by the pandemic has undoubtedly had an  effect on Taiwan’s economy. This was particularly due to the problems associated with interrupted supply chains for its heavily export-focused economy.

The Atradius Payment Practices Barometer provides us with the valuable opportunity to  hear directly from businesses how they are coping with changed trading and economic  circumstances caused by the pandemic. The survey questionnaire was completed by   businesses in Taiwan during Q2 2021, a full year after the World Health Organisation declared Covid-19 a global pandemic.

Key takeaways from the report

Taiwan’s economic model is largely reliant on exports. During periods of healthy trade flows, this has been an economic strength. However, the pandemic has resulted in a
difficult export environment. It is perhaps for these reasons why the majority of businesses we spoke to during the survey expressed caution about the coming months and few were prepared to predict business growth with any confidence.

However, in the year after the outbreak of the pandemic, a significant number of businesses in Taiwan continued to use trade credit very frequently with B2B customers as an effective tool to drive  sales and secure established relationships within a market. Moreover, businesses in Taiwan offer customers the longest payment terms in Asia, almost 20 days more than the regional average.

Liberal trade credit policies may help drive sales and boost confidence, however businesses would be well-advised to protect their accounts receivable through credit risk mitigation measures. .

Key survey findings for Taiwan

• Trade credit involves 55% of all B2B sales of Taiwanese businesses polled
• Payment terms offered by Taiwan businesses are the longest across Asia
• Late payments affect a significantly lower proportion of Taiwan's credit-based sales than across Asia.
• 65% of the respondents to our survey in Taiwan told us they employ trade credit insurance to mitigate the impact of customer credit risk on the business (average for Asia: 59%)
• Looking ahead, potential bank lending restrictions as well as the possibility of renewed geopolitical trade tensions are also reasons for concern for more businesses in Taiwan than in Asia.

Interested in getting to know more?

For a complete overview of the payment practices in Taiwan and in the local ICT/electronics, chemicals/pharma and textiles/clothing industries, please download the complete report.