China's Ministries Suggest Trade Financing Channels

By Zhang Bin, Sun Jianfang
Published: 2009-04-22

News, page 3
Original article: [Chinese]

Several Chinese ministries and commissions have submitted a report to central government policymakers advising it to establish a government-backed credit guarantee firm to solve financing difficulties for export-oriented small and medium-sized firms.

Despite that China issued over 4.5 trillion yuan in new loans during the first quarter of 2009, numerous small and medium-sized firms still faced financing difficulties as the export climate continued to worsen.

The report proposed that central and local governments needed to appropriate 10 billion yuan each to the China Investment Corporation (CIC), the country's sovereign wealth fund, and thus enable the latter to inject funds into mature financing guarantee firms, or establish a new China import and export guarantee firm.

The CIC refused to comment on the matter when contacted via telephone by the Economic Observer.

The report went on to suggest that the central treasury inject 10 billion yuan into the China Export and Credit Insurance Corporation (CECIC), the only policy-oriented Chinese insurance company specializing in export credit insurance. The move could enlarge the coverage of CECIC's services for small and medium-sized firms. The CECIC's registered capital stood at 4 billion yuan.

The EO learned that these proposals came after recent investigations by several ministries into the financing environment in Guangdong and Jiangsu province.

The investigation showed a sharp decline in financing for trade-related industries. Ningbo saw a decline in trade-related financing for four consecutive months since October 2008, with January down 43.8% year-on-year. A market manager from a medium-sized electric motor exporter in Nantong, Jiangsu province, told EO that the Bank of Communications had trimmed down their credit quota from 90 million yuan to 10 million yuan in the beginning of 2008.

An official from the Jiangsu branch of the China Banking Regulatory Commission told the EO that new loans in the first quarter of 2009 mainly flowed into the state-owned large projects.

One industry source told the EO that despite an explosion in new loans during the first quarter of 2009, only 25% of their value went to short-term loans for small-and-medium-sized firms, and that February saw 300 billion yuan less loans to such firms than in January.

Intern Zhao Yuxin also contributed to the article.