Help Enterprises Reduce Bad Debts, Guangdong Intends To Publish Overseas Buyers Blacklist

The financial tsunami has significantly increased the risk of foreign exchange earnings from Guangdong's various foreign trade enterprises.

In a special report on the establishment and improvement of the credit risk prevention mechanism for Guangdong's foreign trade export, Guangdong Council of trade promotion (CCPIT) has called for the establishment of a risk fund for export credit insurance, the establishment of a global credit investigation service system and an early warning mechanism for foreign trade risks in our Province, so as to ensure the healthy and stable development of foreign trade.

Reporters learned that the report, as a proposal for the CPPCC this year, has attracted the attention of the relevant departments.

The bad debt rate of export contract is far beyond the international level. It is reported that the recent survey of 500 foreign trade enterprises by the Ministry of Commerce has shown that the bad debt rate of China's export business is as high as 5%, while that of the international average is only 0.25%, and China is 20 times the international average.

By contrast, the average profit margin of China's main export industries is less than 5%.

According to a survey of 1000 foreign trade enterprises in China by another organization under the Ministry of Commerce, 68% of the enterprises suffered from the loss of interests due to the lack of credit from each other. The most serious damage is the default payment and breach of contract caused by credit risk.

The proportion of accounts receivable delayed receipts and payments of Chinese enterprises is more than 50%, and export credit risk has become one of the main obstacles that restrict China's foreign trade enterprises to further expand their exports.

The investigation conducted by the Guangdong provincial council for trade promotion shows that after the financial tsunami, the number of overseas merchants' Arrears of loans and the export of bad debts increased, and the reported cases of export losses frequently occurred, and there was a danger of expanding the situation.

Guangdong's export credit risk problem is becoming increasingly prominent.

According to the projections of the China Export and Credit Insurance Corp, the potential bad debt losses of Guangdong's export enterprises in the first three quarters of 2008 will reach US $2 billion 500 million, and the reported losses in Guangdong will increase by more than 221.8%, up from 221.8% over the same period last year, with the characteristics of large and serious cases.

In the second half of 2008, due to the impact of the financial crisis, the proportion of "credit orders" that had been shipped and received after the Guangdong enterprises could earn more than 70%, and the risk probability of overseas credit sales rose sharply.

Establishing early warning mechanism to reduce export risks. In the report, Guangdong provincial council for trade promotion pointed out that it is particularly important to help enterprises enhance awareness of risk prevention and ensure the safety of foreign exchange collection, and establish and improve our province's export credit risk prevention mechanism.

It is recommended to establish "global credit investigation service system" and "Guangdong province's foreign trade risk early warning mechanism".

We should closely follow the financial crisis, increase the intensity of monitoring export risks, increase the monitoring of credit risks for buyers in Europe and the United States, and release information on risk dynamics, country risks and industry risks to enterprises at any time. We will include foreign buyers and financial institutions with credit risk changes in the "blacklist", and issue early warning to insurance companies in a timely manner.

In addition, the report recommends that the government should establish a risk fund for export credit insurance, adopt a more proactive fiscal policy to encourage enterprises to purchase products and services such as short-term export credit insurance, medium and long-term export credit insurance, investment insurance, guarantee, business account collection, credit evaluation, insurance policy and so on, and vigorously promote risk prevention tools.

In addition, we should actively strive for policies to the state and set up our export credit insurance institutions, and try to develop more, better and more preferential hedging products.

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