Exporters reluctant to insure overseas shipments tempt fate
By Wang Yanlin |
October 15, 2012, Monday
|
Print Edition
Print Edition
CHINA Export & Credit Insurance Corp is trying to convince the nation's exporters that export credit insurance is a valuable tool in protecting themselves from the economic and political turmoil playing havoc with overseas market demand.
At this year's East China Fair in Shanghai, the company commonly known as Sinosure set up a demonstration booth to promote its products and services. Takers were few.
"It is a bit unfortunate that many Chinese prefer to try their luck rather than do something to control their luck," said Zhu Shouzhong, general manager of the Shanghai branch of Sinosure.
That's a common problem throughout this nation's insurance industry. The Chinese people are reluctant to pay for something intangible.
But as economic conditions in the European Union deteriorate, growth stalls in the United States and a political dispute over the Daioyu Islands sours trade with Japan, exporters are facing problems in their three biggest overseas markets.
Export credit insurance is a policy that protects an exporter against the risk of non-payment by a foreign buyer. In other words, the insurance guarantees that a business will get paid, even if the buyer goes bankrupt or is strapped for cash.
There are few disadvantages in export credit insurance, industry experts say. Weighed against the risk of losing an entire shipment of goods, the insurance premiums are negligible.
Sinosure provides an array of services, including long- and short-term export credit insurance, investment insurance, credit ratings and bond guarantees.
Premium rates vary but are typically a fraction of one percent, based on sales volume, the company said.
In foreign countries, export credit insurance is almost mandatory.
"As the world gets smaller, the need for a company with a global reach will continue to be important," said Gary Mendell, president of US-based Meridian Finance Group.
"Export credit insurance will become absolutely vital to the global economy. It is too risky to do business in a global economic structure without the safety net of this insurance. Therefore, the future of this insurance is a bright one indeed," he said.
In China, it is relatively new, but some Chinese traders have already benefited from its use.
Last year, when the Arab Spring swept the Middle East, export companies with insurance were protected from huge losses when trade with those countries was disrupted.
"Currently, most of our customers are state-owned enterprises that have big overseas operations," said Sinosure Shanghai branch's Zhu.
"But we also welcome smaller companies and can provide them with tailored services," he said.
Last month, the State Council, China's cabinet, announced a slew of new measures to support the country's exporters, including an expansion of export credit insurance coverage to smaller companies.
To make export credit insurance better known, the Shanghai branch of Sinosure this year is expected to offer free short-term policies to 1,000 exporters with individual trade volumes of US$3 million or less.
"Among Shanghai's 15,000 small export-oriented companies, those with insurance coverage could be counted on both hands," Zhu said. "We hope the coverage can reach 20 percent next year."
At this year's East China Fair in Shanghai, the company commonly known as Sinosure set up a demonstration booth to promote its products and services. Takers were few.
"It is a bit unfortunate that many Chinese prefer to try their luck rather than do something to control their luck," said Zhu Shouzhong, general manager of the Shanghai branch of Sinosure.
That's a common problem throughout this nation's insurance industry. The Chinese people are reluctant to pay for something intangible.
But as economic conditions in the European Union deteriorate, growth stalls in the United States and a political dispute over the Daioyu Islands sours trade with Japan, exporters are facing problems in their three biggest overseas markets.
Export credit insurance is a policy that protects an exporter against the risk of non-payment by a foreign buyer. In other words, the insurance guarantees that a business will get paid, even if the buyer goes bankrupt or is strapped for cash.
There are few disadvantages in export credit insurance, industry experts say. Weighed against the risk of losing an entire shipment of goods, the insurance premiums are negligible.
Sinosure provides an array of services, including long- and short-term export credit insurance, investment insurance, credit ratings and bond guarantees.
Premium rates vary but are typically a fraction of one percent, based on sales volume, the company said.
In foreign countries, export credit insurance is almost mandatory.
"As the world gets smaller, the need for a company with a global reach will continue to be important," said Gary Mendell, president of US-based Meridian Finance Group.
"Export credit insurance will become absolutely vital to the global economy. It is too risky to do business in a global economic structure without the safety net of this insurance. Therefore, the future of this insurance is a bright one indeed," he said.
In China, it is relatively new, but some Chinese traders have already benefited from its use.
Last year, when the Arab Spring swept the Middle East, export companies with insurance were protected from huge losses when trade with those countries was disrupted.
"Currently, most of our customers are state-owned enterprises that have big overseas operations," said Sinosure Shanghai branch's Zhu.
"But we also welcome smaller companies and can provide them with tailored services," he said.
Last month, the State Council, China's cabinet, announced a slew of new measures to support the country's exporters, including an expansion of export credit insurance coverage to smaller companies.
To make export credit insurance better known, the Shanghai branch of Sinosure this year is expected to offer free short-term policies to 1,000 exporters with individual trade volumes of US$3 million or less.
"Among Shanghai's 15,000 small export-oriented companies, those with insurance coverage could be counted on both hands," Zhu said. "We hope the coverage can reach 20 percent next year."
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