The issue of "chain debt" has plagued China's tire industry for many years. It is common for small and medium tire enterprises to have their payments delayed, with some even facing bankruptcy due to unpaid receivables. This phenomenon has intensified against the backdrop of a fierce "price war" in the automotive market in 2025. Many OEMs have used non-cash payment methods such as commercial drafts and electronic accounts receivable certificates to effectively extend payment terms, delaying the accounts of tire enterprises for months.

On June 1, 2025, the revised "Regulations on Ensuring Payments to Small and Medium Enterprises" (hereinafter referred to as the "Regulations") came into effect, providing new solutions to alleviate the payment collection challenges faced by small and medium tire enterprises.

The Pain of Payment Collection in the Tire Industry

In the tire industry, delayed payments have become the norm. The phenomenon of "chain debt" is particularly prominent. Downstream customers delay payments, causing distributors to face tight cash flows and preventing them from paying upstream manufacturers on time. This strains the entire industry's financial chain. Even leading tire manufacturers have to cater to the demands of OEMs, resulting in slow payment collections. If a new energy vehicle manufacturer "implodes," there is even a possibility of never recovering the payments.

Core Content of the New Regulations

The revised "Regulations" specify clear payment deadlines. Government agencies and public institutions are required to make payments within 30 days from the delivery of goods, projects, or services. If the contract stipulates otherwise, the payment period must not exceed 60 days. Large enterprises must make payments within 60 days from the delivery of goods, projects, or services. Even if payment terms are reasonably agreed upon according to industry standards or trading practices, it is prohibited to condition payments on receiving third-party funds.

The "Regulations" explicitly prohibit forcing small and medium enterprises to accept non-cash payment methods such as commercial drafts and electronic accounts receivable certificates. These methods must not be used to effectively extend payment terms. For transactions where there are partial disputes that do not affect the fulfillment of other parts, the undisputed portion must be paid promptly. This prevents large enterprises from using minor disputes as a pretext to delay entire payments.

Rights Protection and Complaint Mechanism

The State Council has established a nationally unified complaint platform for delayed payments to small and medium enterprises, strengthening the complaint handling mechanism. The department accepting complaints must, within 10 working days from formal acceptance, forward the complaint to the handling department according to procedures. The handling department must provide written feedback on the outcome to the complainant within 30 days. For complex cases or those with special circumstances, the handling period may be extended to a maximum of 90 days.

The "Regulations" also include a credit punishment mechanism. Government agencies, public institutions, and large enterprises that are found to have delayed payments to small and medium enterprises after investigation will be included in a dishonesty list and publicly disclosed. Government agencies will face restrictions on official consumption, office space, and budget allocations, while large enterprises will be limited in accessing financial support, investment project approvals, and financing.

Impact on the Tire Industry

The new "Regulations" are highly significant for the tire industry. Although tires are a critical component in automotive manufacturing, Chinese manufacturers have little pricing power. Even leading tire manufacturers must cater to OEMs, resulting in slow payment collections. OEMs have forced the acceptance of non-cash payment methods such as commercial drafts and electronic accounts receivable certificates, delaying the accounts of tire enterprises for months.

In 2025, amid a "price war" in the automotive market, this phenomenon has intensified. The newly introduced "Regulations" are expected to curb this worsening trend, benefiting small and medium tire enterprises. Sentury Tire disclosed in its 2024 financial report a bad debt provision for an account payable from an OEM. This amount totaled RMB 48.6801 million and is currently in the enforcement stage after court proceedings.

As of August 2025, the China Small and Medium Enterprises Service Network has provided free policy, bidding, and other information matching services millions of times to hundreds of thousands of small and medium enterprises. Officials from the Ministry of Justice and the Ministry of Industry and Information Technology stated that after the implementation of the new "Regulations," they will emphasize both service and management, as well as development and support, to further enhance assistance to small and medium enterprises. Small and medium tire enterprises can now look forward to a gradual reduction in delayed payments through commercial drafts and electronic accounts receivable certificates, making cash flow more predictable. In future trading environments, credit will become the most valuable asset.