Treasury and Payments
China experienced mixed results for
working capital metrics
The Working Capital Index China Report 2022 highlights how the country’s working capital index deteriorated in 2021. However, the country’s cash index trended down indicating more aggressive cash deployment.
China emerged as one of the first economies to recover from the pandemic. However, the global operating environment presented multi-faceted challenges in 2021 including lockdown impacts, reduced domestic demand growth, subsiding policy support, and reduced investment and export demand given strong economic recovery. As a result, the Working Capital Index deteriorated in 2021. The Cash Index improved with a similar trajectory to S&P 1500 companies as investment activities picked up and companies looked to sustain growth momentum through more aggressive cash deployment.
Summary of findings
Working capital and cash conversion cycle takeaways
The working capital index deteriorated by 4 points and returned to pre-pandemic levels for four reasons:
The Cash Index improved 8 points as companies more strategically deployed cash:
The Cash Conversion Cycle declined by 2 and is significantly higher for Tier 2 sized companies
Chinese companies generally hold higher cash levels than their U.S. counterparts
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