Eximbank and China s foreign trade


Eximbank and China's foreign trade

Mission and organization of Eximbank

Eximbank was founded in 1994. It is an exclusively state-owned, policy-oriented bank under the direct leadership of the State Council. Its primary responsibility is to implement industrial, financial and trade policies set forth by the state. It provides policy-oriented financial support to the export of capital goods such as mechanical and electronic products, high-tech products and complete sets of equipment. It also offers other financial assistance to offshore engineering projects and overseas investment. It facilitates other types of international economic and technological cooperation and exchange.

Eximbank is headquartered in Beijing. At home it has two subsidiaries (in Beijing and Shanghai) and eight representative offices in major cities (Dalian, Qingdao, Xi'an, Nanjing, Chengdu, Wuhan, Fuzhou and Guangzhou). Outside China, Eximbank has one representative office in Cote D'Ivoire and another one in South Africa. In 2002 it set up another subsidiary in Shenzhen and an additional office in Harbin.

Business development and the role of Eximbank

As a state policy-oriented financial institution dedicated to China's export promotion, Eximbank follows closely its articles of association approved by the State Council since its opening on 1 July 1994. It has steadily built up an extensive business portfolio to include export seller's credit, export credit insurance, overseas guarantee, export buyer's credit, etc. Since 1995 the bank has undertaken foreign government concessionary loans, foreign favourable loans and foreign trade development loans funded by the central government. Eximbank also provides other overseas investment support products, such as those in support of offshore contract manufacturing, overseas engineering projects, and has put together a relatively complete service package through its policy-oriented financial service network. At the end of 2001 the State Council decided to transfer the entire export credit insurance business to the newly established Export Credit Insurance Company of China.

By the end of June 2002 Eximbank had accumulated loans totaling close to 200 billion renminbi. Its export financing for mechanical, electronic, high-tech products and complete sets of equipment totaled over US$80 billion. Its market covers 31 provinces , cities and autonomous regions in China, and export markets supported by the bank extend to 85 countries globally. Hence Eximbank plays an increasingly important role in bolstering China's national economy in line with the 'stepping out' strategy.

The major lines of Eximbank

The business lines of Eximbank primarily include: export credit (seller's credit and buyer's credit), overseas guarantees , foreign favourable loans and foreign government concessionary loans.

Export seller's credit is the financial service provided to Chinese exporters which enables exporters to be in a position to accept deferred payment by foreign importers. This includes five different types of arrangement: project loans, short and mid- term credit lines, overseas engineering project loans, offshore contract manufacturing loans and overseas investment loans.

Export buyer's credit refers to the long and mid-term loans in favour of foreign borrowers. Its purpose is to enable foreign importers to be in a position to offer upfront payment to Chinese exporters. This is an option in support of China's exports of goods and technology services.

Overseas guarantees denote the promise to pay offered to overseas creditors or beneficiaries in the form of a letter of guarantee. In the event that the debtor fails to honour its commitment to pay under contract stipulations, the bank will undertake the payment responsibility specified in the letter of guarantee. Such guarantees include such items as borrowing , tendering , contract performance and contract deposit. They cover areas such as the export of mechanical and electronic products, high-tech products and complete sets of equipment, offshore engineering projects, international tenders by domestic financial organizations and foreign government loans.

Foreign favourable loans are long- and mid-term low-interest loans offered to other developing countries by the Chinese government in the nature of foreign aid. Beneficiaries of this type of loan are Chinese and foreign firms who are able to construct production facilities in the designated countries. These facilities must demonstrate the prospect of economic return and the capability to pay back. Such loans can also be granted for the construction of infrastructures and social welfare projects which demonstrate the capability to pay back. Exim- bank is the only bank to underwrite this type of loan.

Foreign government concessionary loans are those favourable loans and mixed loans offered by foreign governments to the Chinese government. Eximbank acts as an agent under the mandate of the Chinese Ministry of Finance to dispense these loans. Mixed loans are a combination of favourable loans offered by foreign governments and commercial loans offered by foreign banks. Eximbank is the primary concessionary bank for the loans offered by foreign governments .

Among all the business lines mentioned above, export financing constitutes the most important part of Exim- bank's business. In practice it generally requires a 15 per cent down payment by the foreign importer, with the balance of 85 per cent being undertaken by Eximbank in the form of an export credit.

Sources of finance for Eximbank and its world credit rating

Renminbi business
According to its articles of association, besides its capital reserves , Eximbank raises credit capital through the issuance of financial bonds in China. In the event of a shortage of reserve funds, provisional loans can be applied for from the People's Bank of China, or short- term funds can be borrowed in the inter-bank market. By the end of June 2002 Eximbank had raised over 100 billion renminbi through 19 rounds of financial bonds. Long-term bonds were issued through interest rate difference bidding and short-term bonds were raised through a combination of interest rate difference bidding and price bidding. At present capital operations are also procured through interbank credit transfers, transactions of national bonds and national bonds buybacks.

Foreign exchange business
Except for the reserve fund the foreign exchange capital of Eximbank is primarily raised in the financial markets at home and abroad. In July 1996 and October 1999 the bank issued bushi bonds of 20 billion yen in Japan and US$200 million debenture bonds in the European financial market. In the meantime the bank also conducted interbank short-term capital financing. Its capital operations include inter-bank financing, foreign exchange transaction, bond sales and purchase as well as hedging and options.

In 2001 Eximbank's credit rating was rated BBB by US Standard and Poor's and A by Japan Rating and Investment Information, Inc., which is consistent with the sovereign rating standard.




Doing Business with China
Doing Business with China
ISBN: 1905050089
EAN: 2147483647
Year: 2003
Pages: 648
Authors: Lord Brittan

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