Rising Working Capital Requirements in Asia-Pacific
Companies in the Asia-Pacific region are facing increasing cashflow pressures as global working capital requirements (WCR) continue to rise. According to Allianz Trade’s latest WCR and Days Sales Outstanding (DSO) report, global WCR increased by two days to 78 in 2024, marking the highest level since 2008. The Asia-Pacific region experienced an even sharper rise, with WCR reaching 82 days – up by two days from 2023 and surpassing all previous records for the region.
The region’s DSO also rose to 66 days, exceeding the global average of 62 days. Notably, one in four companies in Asia-Pacific received payments more than 90 days after invoicing, the highest rate globally alongside the Middle East. The global average stood at 21%. China and Singapore were among the main contributors to the region’s increase in WCR, with respective gains of four and two days.
Sector-level data revealed broad-based increases across various industries. The transport equipment sector saw a significant rise in WCR by 22 days in the region, while commodities and pharmaceuticals experienced increases of eight and six days, respectively. Electronics, pharmaceuticals, and B2B services also posted higher DSOs.
The increase in working capital needs was largely driven by longer payment terms, while other components such as inventory and supplier payment periods remained relatively stable. This trend revives an upward trajectory observed in 2021 and 2022 when companies faced similar pressure to maintain liquidity.
Globally, 35% of companies had WCR exceeding 90 days by the end of 2024. European firms saw a sharper four-day increase in WCR, driven by higher inventory levels and shorter supplier payment terms. This resulted in an estimated €11 billion in additional trade credit extended to business partners in early 2025. In contrast, US companies reduced inventories, freeing up capital and allocating more funds to shareholder returns. With US$234 billion in buybacks announced in the first quarter of 2025 alone, annual repurchases are expected to surpass US$1 trillion.
Trade tensions could add more pressure to the situation. Allianz Trade estimates that if proposed US tariffs are fully enforced, companies in Asia supplying both American and European markets would be indirectly affected. European firms may need an additional €8.5 billion in financing, while US firms would require US$15.5 billion, equivalent to three days of turnover in each market.
With Asia-Pacific already exposed to extended payment cycles, businesses must prepare for more uncertainty in trade flows and financing terms. The region’s companies need to develop strategies to manage their working capital requirements effectively and mitigate potential risks associated with delayed payments and changing trade dynamics.
