Concerns of a new financial crisis were sparked on Monday (August 24th) as the Chinese market suffered its worst day of trading in seven years.
Stocks fell by around 8.5%, triggering an economic tsunami that left London and New York reeling as their respective days began trading.
News outlets place the total loss in early trading on the FTSE100 at anywhere between about £40 billion and £90 billion – depending on the moment the article was published.
Either way, it seems the shockwaves from what has been dubbed China’s ‘Black Monday’ will reverberate in global stocks for some time.
Looking back, the last time the Shanghai Composite suffered a drop like this was in 2007, and coincided with the beginning of the global economic crisis.
For obvious reasons, many economists and commentators are looking to this new slump as a harbinger of doom not just for China, but for businesses and consumers the world over.
As always, for businesses, sensible credit control practices are the key to protecting – as far as is realistically possible – against any downturn that might emerge in the weeks to come.
Background credit checks are always a sensible precaution before taking on a new customer, or even before renewing credit agreements with existing clients if you are uncertain about their circumstances.
But in an uncertain economy, it is also wise to keep well on top of your invoicing – prompting customers to pay sooner wherever possible, to make sure your trade debt risk is as small as it can be.
If the worst happens and you suffer an insolvency in your supply chain, this helps to minimise the risk of yours being the company that is left unpaid for goods or services already supplied.
Ultimately, if new turbulent times are ahead, it is the companies that protect themselves in such ways that will emerge unscathed from the other side.