The Ministry of Commerce (MOC) of China has warned that the Chinese exporters were facing increased risk of receiving their dues from the overseas banks owing to the credit crisis. Usually exporters resort to route their international transactions through banks to avoid default of payments by their business partners abroad. Since most of the international banks are confronted with credit crunch, payments to the exporters are delayed.
Dwindling sales figures and shrinking profit margins of the overseas buyers due to the global economic slowdown are forcing the importers to default. Even those with excellent payment history have fallen in this bracket lately. The ministry claimed incidences of grievous debt evasion and breach of contracts by importers from certain countries or regions have become order of the day.
The MOC has appealed the local governments, guilds and international Chinese businesses to closely monitor the credit balances of the importers before committing to any trade. Emphasis should be laid on tracking the credit ratings of foreign lenders to minimize risk, it further added. The ministry has urged local governments to engage in providing support to the development of export credit insurance, and to encourage exporters to carry out such insurance by reducing premiums.
Currently, Sinosure is the sole export credit insurance agency of China, offering export credit and credit insurance. According to them, from January to November last year, the company has provided $56.5bn of guarantee for exporters against credit risks such as payment default. The credit guarantee has increased by a staggering 63.6 percent during the same period in comparison to the previous year, clearly indicating that the exporters have already started taking precautions.