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Banks ignore call for expanding export credit as outlook remains bleak

By Nie Peng (chinadaily.com.cn)
Updated: 2008-11-20 15:36

As the outlook of the export sector remains gloomy, China's commercial banks have been indifferent to a central bank appeal to expand export credit but are focusing more on risk management, the Shanghai Securities News reported on Thursday.

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China's central bank recently said it encourages financial institutions to expand export credit and explore ways of medium and long term export financing in renminbi and will provide them related counseling.

On Wednesday, the Ministry of Commerce said it is pessimistic about export growth in the United States, European and Japanese markets in the remaining months of the year, and that the worsening global economy will continue to exert negative impacts on China's imports and exports in 2009.

Statistics from the Canton Fair, a direct barometer for the country's foreign trade, already showed a downturn in overseas demand when it concluded earlier this month. The value of export deals clinched at the fair contracted 17.5 percent over the previous session in April.

The slowing export sector has passed on its troubles to Guangdong's banking sector, according to Meng Jianbo, deputy director of Guangdong Provincial Banking Regulatory Bureau.

Meng said credit risks have become higher now that defaults on loans are on the rise due to the worsening performance of exporters, who have been struggling to cope with declining overseas demand.

An executive with the international business division of a State-owned bank said exporters are now subject to stricter qualification reviews from his bank than previous years. He said the bank's export credit business remains small and the headquarters so far has not given any further instruction on how to implement the central bank's new policy.

According to the newspaper, commercial banks, which now mainly concentrate their credit business on government-backed infrastructure projects, have a reserved attitude toward export financing and are instead making greater efforts to improve management and strengthen risk controls.

Zhou Kunping, deputy general manager with the development research arm of Bank of Communications, said banks should differentiate exporters' needs for financing. In his view, banks should study new conditions in exports and, while being careful with loans that involve high risks, may still provide support for exports that have good prospects, such as some high-tech products.

Wu Zhifeng, an industry insider, said the central bank's new policy was conducive to the stable growth of China's exports in the long run.

The move will help sharpen Chinese exporters' competitiveness because foreign importers suffering from credit freezing will be more motivated to do business with their Chinese counterparts if they can obtain export credit from China, Wu said.

Medium and long term financing is conducive to exports of mechanical and electrical equipment, and is especially helpful for tapping the Asian, African and Latin American markets, he added.