On September 7, the Ministry of Industry and Information Technology and the State Administration for Market Regulation jointly issued a notice addressing payment practices in the automotive supply chain. The new policy urges automakers to pay small and medium-sized enterprise (SME) suppliers within 30 days of goods passing inspection, with a 60-day maximum limit, while also encouraging full cash payments.
The directive further stipulates that when contracts do not specify payment terms, cash payments must be used for SME suppliers, prohibiting substitutes like commercial bills or electronic receivables vouchers. Large automakers, including wholly-owned or controlled subsidiaries and leading firms, are encouraged to settle SME accounts in cash within 60 days of receiving goods, projects, or services. Companies are also required to establish robust risk control and compliance systems, ensuring that subordinate units and tier-one suppliers promptly meet their obligations to smaller partners.
As a pillar industry, the automotive sector features numerous supply chain tiers with a high density of SME suppliers. For years, some automakers have struggled with opaque payment timelines, extended receivables periods, and excessive reliance on bills for settlement. In June 2025, 17 key auto companies publicly committed to keeping payment cycles under 60 days, reflecting their responsibility to the ecosystem. By September 2025, the China Association of Automobile Manufacturers reinforced this with a formal initiative to push the commitment forward.
An official from the Ministry of Industry and Information Technology stated that the notice adopts a problem-oriented approach, addressing key challenges in implementing the industry initiative. It introduces five core requirements: clear payment timeline start dates, efficient and standardized acceptance procedures, full and timely payments, compliant and convenient payment methods, advance payments during price negotiations, and priority protection for SMEs.
First, the ruling clarifies that payment periods begin only after suppliers deliver goods, projects, or services and they pass acceptance. For suppliers delivering more than twice a month, the time from the midpoint of the continuous supply cycle to payment must not exceed the agreed ceiling. Second, acceptance processes are standardized, requiring automakers to complete inspections within reasonable timeframes: three working days for standard parts and five working days for components needing vehicle installation verification.
Third, payment deadlines must be clearly embedded in contracts, not surpassing public commitments, with interest legally mandated for overdue payments. Payment timing is generally defined based on spot cash settlement, unifying the criteria for what constitutes a completed transaction. Fourth, cash payments are prioritized, prohibiting coercion of suppliers into accepting bank acceptance bills, commercial notes, or supply chain bills. Where non-cash methods are unavoidable, usage must be capped and discount costs explicitly agreed upon.
Fifth, during price negotiations, advance payments are required: at least 90% of the latest contract price for ongoing supplies and 70% of the industry average or development order price for non-continuous supplies, with final adjustments based on agreed pricing. Zhang Xiaorong, dean of the Deep Technology Research Institute, observed that this notice marks the first time payment periods have been set as a hard limit with a clear cash-first principle, systematically closing loopholes across the payment workflow and strengthening SME suppliers' resilience.
Zhang Xiang, secretary-general of the International Intelligent Transport Technology Association, noted that SME suppliers often bear production costs upfront while facing prolonged capital occupation, straining their cash flow and hindering research and development, capacity upgrades, and sustained partnership. In the long run, a standardized and transparent settlement framework is expected to reshape collaboration across the automotive value chain, fostering a mutually beneficial ecosystem where major OEMs and supporting SMEs achieve coordinated growth.