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.
 

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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

Industry improvement opportunities

  • true

    eCommerce
    Raise operational efficiencies to keep their competitive edge

  • true

    Oil and Gas downstream
    Prepare business models for a world with greater global clean energy consciousness

  • true

    Pharmaceuticals
    Optimize financing resources given sophisticated operating environment

  • true

    Auto and auto parts
    Focus on internal funding and WC structure optimization to prepare for liquidity challenges

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