On the morning of July 18, the Executive Bureau of the Supreme People's Court and People's Daily Online jointly launched the "List of Untrustworthy Persons Subject to Enforcement." Those listed are individuals or entities that have breached court enforcement orders, commonly known as "Laolai" in China. According to Baidu Encyclopedia, "Laolai" originally referred specifically to those who had long owed money to others. Legally, however, it denotes a category of debtors in civil and commercial disputes who possess the ability to repay their due debts but refuse to settle all or part of them for various reasons.

As reported by the Supreme People's Court, over 197,000 such untrustworthy individuals/entities have been publicly named so far. Among the published "Laolai" rankings, nearly 40 enterprises in the ceramic industry are listed—including 33 ceramic construction firms—with the highest amount of unpaid debts reaching 110 million yuan. Some enterprises have even been labeled "Laolai" three times.

Yet this is merely the tip of the iceberg. A survey by a reporter from Taocheng Daily revealed an unfair trade dynamic between ceramic enterprises and their suppliers: ceramic companies delay payments to suppliers by as little as three months, and in some cases, more than six months. When market conditions worsen, delays can stretch to several years, or payments may even be avoided entirely. Some senior executives in the ceramic industry, however, argue that the reason their enterprises default on raw material purchases is to hold back payments pending quality inspections of certain materials—claiming that delayed payments are a measure to protect the enterprises' own interests.

Nevertheless, it is an indisputable fact that ceramic enterprises shift market risks to suppliers by extending payment terms. If the market slumps and a ceramic enterprise goes bankrupt or its owners flee, suppliers are dragged down with them. Recently, within just six days, three ceramic companies—located in Gao'an (Jiangxi Province), Yueyang (Hunan Province), and Neihuang (Henan Province)—were exposed as either shutting down or having their owners flee. These incidents have deepened suppliers' anxieties about prolonged payment delays.

The Plight of Debt Collection

On July 28, at the headquarters base of China Ceramic City in Foshan, Guangdong Province, A Jing (a pseudonym), a sales manager at a supplier of chemical raw materials for ceramic enterprises, pulled out his phone and sent a document to the reporter via WeChat. It was a "restructuring plan" and "repayment plan" drafted in May by a ceramic enterprise in Zhaoqing.

In the "restructuring plan," the Zhaoqing-based ceramic enterprise openly admitted that due to declining operating performance, severe losses, and total debts of 280 million yuan, it had become insolvent. To address this, it planned to introduce new shareholders to restructure its production facilities, with an estimated investment of 72 million yuan. As a result, it requested to defer payments owed to suppliers. Under the enterprise's proposed repayment plan, the outstanding debts would be settled in four installments between 2014 and 2017, with 10% to 20% of the total amount repaid each year.

On the same day, A Feng (a pseudonym), marketing manager of a Foshan-based color glaze enterprise, was on his way to Guangxi to collect debts. "Collecting money is extremely difficult this year. The market is tough, so I have to run around to chase payments," he said, declining an interview—partly out of fear that speaking out about the "Laolai" issue would make debt collection even harder.

For Fu Jianwu, a supplier of ceramic raw materials and general manager of Foshan Speeding Chemical Co., Ltd. (which develops and produces ceramic additives such as water reducers and degumming agents), debt collection is also his top concern this year. He favors a steady business approach: "Sales volume isn't everything—expanding too quickly is risky, mainly because of delayed payments."

In Fu's view, the slow capital turnover caused by difficult debt collection has resulted in significant losses. He gave an example: if a ceramic enterprise delays paying a 1,000-yuan invoice by 8 months, he has to borrow 1,000 yuan from a bank to cover cash flow gaps—incurring additional bank interest. "If the original profit on that order was 100 yuan, the 8-month delay would wipe out that profit with bank interest alone. Add in rising transportation costs, raw material prices, inflation, and labor costs, and profits shrink even further. Faster capital turnover would lower costs and risks for everyone," he explained.

Last year, one of Fu's sales staff secured a deal with a ceramic enterprise—but a year later, the payment is still unpaid. "We knew the enterprise was struggling, but the salesperson is related to its owner. We shipped the goods to help the salesperson, thinking tens of thousands of yuan wouldn't be withheld. We gave them a chance," Fu said. Normally, he would avoid such customers. After delivering the first batch of goods and seeing no payment, he halted further supplies. Later, when the ceramic enterprise was exposed for owing wages to workers and suppliers blocked its gates, Fu retrieved about one-third of the unused raw materials he had supplied.

"The debt isn't huge—around 30,000 yuan," Fu said. He negotiated with the enterprise to settle the debt with goods, taking a batch of ceramic tiles to Shagang (a major trading hub) for resale. He is now waiting for the enterprise to package the tiles, anxious about potential further issues. Even if he manages to resell them, he expects to take a 10% loss at best—often 50% or more. "Tiles bought for 16 yuan each can only be resold for 7 to 8 yuan in Shagang, but it's better than getting nothing," he sighed.

"Asking them for cash is impossible—they can't pay. Getting tiles instead is already lucky," Fu added. Compared to last year, this year's situation is even more severe: banks have tightened lending, liquidity in the industry has dried up, and unprecedented environmental regulations have forced many ceramic enterprises to suspend or shut down production.

A major flaw in the ceramic industry—delayed payments and extended credit periods—has created a breeding ground for "Laolai," forcing suppliers to be more cautious. "Virtually no ceramic enterprise pays upfront now. Even 'high-quality customers' delay payments by at least three months—and that's considered good. Normally, it's six months; worse cases, nine to ten months, or even over a year," Fu said.

"If the boss runs away with the money, we get nothing," he added. When an enterprise goes bankrupt, worker wages are prioritized first, followed by bank loans. Only then—if any funds remain—do suppliers get paid. "There's rarely anything left for us," Fu lamented. He had planned to invest in new equipment for product development this year, but the harsh market environment has put those plans on hold.

The Aftermath of Over-expansion

Since 2006, China's ceramic industry has experienced a phase of rapid expansion, driven largely by bank loans and delayed payments to suppliers.

Take Jiangxi Province's ceramic production base as an example:

 

In 2007, Xinmingzhu Ceramics built 20 new production lines in Gao'an, Jiangxi—with a total capacity three times that of its original Foshan factory.

 

 

By December 2008, 25 ceramic enterprises had started operations in Gao'an, with 30 production lines in service and a daily output of 68,000 square meters of polished tiles alone.

 

 

In 2009, Gao'an added 22 more ceramic production lines, bringing the total number of production lines across Jiangxi's ceramic bases from over 100 to nearly 140.

 

 

By 2011, according to the National Ceramic Tile Production Capacity Report, Jiangxi's ceramic construction sector had 226 production lines, with a daily capacity of 3.3161 million square meters and an annual capacity of approximately 1 billion square meters.

 

During this expansion spree, many ceramic enterprises relied on external funds to build new factories. Industry insiders estimate that over half of these enterprises raised funds by acquiring land, mortgaging assets, and relying on suppliers' deferred payment terms as a form of financial support.

"In theory, building a ceramic factory costs hundreds of millions of yuan, but the actual cash invested by the enterprise may be just tens of millions," Fu Jianwu noted. "Where does the rest come from? Suppliers and banks. Many ceramic companies survive on supplier credit and bank loans."

Zou Jianbin, head of Hunan Xinhua County Hongli Industry and Trade Co., Ltd., which supplies porcelain clay to ceramic factories in Hunan and Jiangxi, understands this firsthand. Having entered the industry just over a year ago, he explained: "Ceramic factories consume massive amounts of raw materials—suppliers may be owed millions, even tens of millions of yuan. If you can't afford to wait six months for payment, the factory won't buy from you. This squeezes out small-scale suppliers." Lacking sufficient working capital, Zou acts as an intermediary rather than dealing directly with ceramic factories.

Rapid expansion has heightened the risk of capital chain breaks for ceramic enterprises. Some have resorted to leasing machinery to reduce upfront costs; others seek financing through channels like private lending, private equity, mutual guarantees, or debt-to-equity swaps. A few even rely on delayed payments to suppliers as operating capital. Recently, a ceramic enterprise that collapsed due to a capital chain break owed a total of 240 million yuan—including 124 million yuan to suppliers, 50 million yuan in bank loans, and 60 million yuan in private financing. Half of its funds came from unpaid supplier debts, according to a Taocheng Bao investigation.

An anonymous senior industry insider attributed the industry's practice of delaying supplier payments to poor business management among ceramic enterprises: "When the market was booming, some ceramic companies made profits but diverted funds from their core business to invest in real estate, hotels, and other sectors. Combined with overexpansion, this strained their capital chains—leading them to extend supplier payment terms, setting a bad precedent."

"Once one enterprise did it, others followed, and it became the norm," Fu Jianwu agreed, quoting Lu Xun: "There is no road in the world; it becomes a road when many people walk on it." Having worked in ceramic raw materials since 2006, Fu recalled that before 2008, the ceramic industry had a relatively good reputation—delaying payments by three months was considered unacceptable. "Now, a three-month payment term makes a customer 'high-quality.'"

Suppliers are in a weak position relative to ceramic enterprises and have little bargaining power. "Contracts are basically useless in this industry—they carry no real weight," A Jing said. Approximately 70% of ceramic enterprises do not sign formal contracts with suppliers. Even when contracts are signed, they only restrict suppliers—dictating quality standards, delivery timelines, and penalties for delays.

"If there's a quality issue, they can return the goods; if we miss a delivery, they fine us a percentage of the order value. But when it comes to payment terms, they refuse to include any clauses that bind them," A Jing explained. If a supplier's self-drafted contract includes terms like interest on overdue payments, ceramic enterprises will reject it. "This is a sign of the industry's lack of integrity," A Jing added.

"When developing new products, we avoid targeting the ceramic industry now. Prolonged payment delays hurt us too much," he said. His company plans to shift focus to new industries and reduce its reliance on ceramic factory orders. "It feels like we're fleeing, but we have no choice," A Jing admitted.

Breaking the Cycle of Deadbeats

"The vicious cycle of extended payment terms is also caused by cutthroat competition among suppliers," Zou Jianbin pointed out. "If you refuse to offer longer terms, someone else will."

Compared to ceramic enterprises, there are relatively few large, financially strong raw material suppliers. Most suppliers prioritize securing deals quickly and struggle to form a united front. Fierce market competition leads suppliers to undercut each other—either by lowering prices or extending credit periods to win customers. Ceramic enterprises exploit this, choosing suppliers who can tolerate the longest delays to ease their own financial pressure.

"Once this model takes hold, it's hard to change," Zou said. "Suppliers have trapped themselves. Solving this vicious competition would benefit the entire ceramic industry."

Amid the current market slump, avoiding "Laolai" has become a consensus among suppliers, who are growing increasingly conservative in customer selection.

Huang Huiting, who has supplied spare parts to ceramic enterprises since 2006 and now serves as general manager of Foshan Basell Electromechanical Co., Ltd., assesses potential customers through small details to gauge their viability.

"If an enterprise's boss is always rushing around like a firefighter, with people waiting to see them constantly, there must be problems," Huang said, recalling an incident: during a visit to a ceramic factory, he witnessed a worker quitting over unpaid compensation. The boss haggled with the worker, claiming the factory's rules did not require compensation. "A boss who directly conflicts with frontline workers over such a small issue shows poor management. I was very cautious about doing business with them afterward—even if they're fine this year, there's no guarantee for next year," Huang explained.

Huang categorizes customers and adjusts credit terms accordingly:

 

For well-known, high-quality customers with a proven track record, he offers partial credit and only defers a small portion of payment.

 

 

For lesser-known or new customers, he offers no credit at all.

 

He has also set strict repayment targets for his sales team: except for long-term high-quality customers, at least 95% of the order value must be paid upfront. For out-of-province customers, he refuses checks or promissory notes—accepting only cash or bank transfers, with delivery contingent on full payment. "There are thousands of customers in the market—three to five thousand nationwide. If I can secure 100 to 200 long-term high-quality customers, I can avoid most market risks," Huang said.

"Customer credit assessment will definitely become more rigorous," said Zhang Tianjie, deputy general manager of Sinocera Create-tide. He evaluates customers based on past cooperation records, operating conditions, financial strength, overall capabilities, and industry reputation. "The most important factors are the enterprise's creditworthiness and the boss's integrity," Zhang emphasized. "Not all business is worth doing."

Wu Junliang, Commercial Director of Guangdong Modena Technology Co., Ltd., warned: "Enterprises should slow down expansion and exercise caution. The industry is in a slump—some enterprises will collapse due to capital chain breaks or market miscalculations, which will impact upstream suppliers' business expansion and fund recovery." He has instructed his sales team to thoroughly assess the operating conditions of potential partners, select customers carefully, and avoid risky deals for the sake of short-term performance.

The essence of extended payment terms is ceramic enterprises using suppliers' funds through time differences. In Zhang Tianjie's view, however, this is a form of corporate financing and an inevitable product of a market economy. "Every industry has payment terms—even suppliers to Midea (a leading Chinese home appliance maker) face a six-month term," he said. "The party with the most market resources sets the rules. While it's said that 'stores exploit customers,' customers can also exploit stores."

From a legal perspective, however, government intervention is needed to formulate laws and regulations guiding the market toward healthy development. For example, the unethical practice of chain retailers using payment terms to secure funds is identical to that in the ceramic industry. Yet after a series of retail bankruptcies, regulations were introduced to address the issue.

In 2005, the collapse of Pulsemart—once one of China's top 48 supermarket chains—was a typical case of a retailer defaulting on supplier payments, leading to a catastrophic capital chain break. In response, on October 13, 2006, five government agencies—the Ministry of Commerce, the National Development and Reform Commission, the Ministry of Public Security, the State Taxation Administration, and the State Administration for Industry and Commerce—jointly issued the Measures for the Administration of Fair Trade Between Retailers and Suppliers. Article 14 stipulates that retailers and suppliers must clearly agree on payment terms in contracts based on product attributes, and the agreed payment period shall not exceed 60 days after goods are received.

This regulatory model for standardizing payment terms in the retail industry is well worth emulating for the ceramic industry.