China’s foreign trade and export credit insurance amid COVID-19
Celebrating two decades of existence, SINOSURE's President elaborates on China trade, regional cooperation and the way forward for export credit insurance
On the last day but one of 2020, just one and a half months after the signing of the Regional Comprehensive Economic Partnership (RCEP), President Xi jointly announced with his European counterparts the conclusion of the negotiations of the EU-China Comprehensive Agreement on Investment (CAI), bringing the world a silver lining after a prolonged recession. With effective containment of the pandemic, China became the first country to resume work and production and registered positive GDP growth in 2020, along with resilient growth in its foreign trade.
Foreign trade: New records against global downtrend
Despite the gloomy backdrop of global trade, China presented a ‘V-shaped’ recovery with a drastic decrease in the first quarter followed by a steady rally in second half of the year:
New records both for volume and market share. The country’s foreign trade rose by 1.9% to CNY32.2 trillion ($4.95 trillion) with exports expanding 4% to CNY17.9 trillion. WTO data show that in the first 10 months the country’s exports accounted for 14.2% of the world total, a record high.
Improved export structure with new impetus. Private enterprise continued to be the main force in China’s foreign trade, contributing 46.6% to the total, valued at CNY14.98 trillion (up 11.1% year on year). ASEAN became China’s largest trading partner for the first time and four (EU, US, Japan and South Korea) out of the top five partners saw growth.
Moving up the value chain, electro-mechanical products stood out, with a share of 59% of the export total, an increase of 6%. The pandemic brought a boost to cross-border e-commerce which registered growth of 31% to CNY1.69 trillion. Eighteen hundred overseas warehouses functioned as important hubs as well as new infrastructure for overseas marketing.
Support for global supply chains. As a manufacturing giant, China also played an important role stabilising global supply chains through providing and exporting CNY438.5 billion epidemic prevention supplies to more than 200 countries and regions from March 2020 to the end of the year. ‘Stay-at-home economics’ products including laptops with a value of CNY2.51 trillion were exported to meet the needs of people who worked from home during the crisis.
Foreign investment: Steady and healthy growth
For 2020, China’s FDI increased by 3.3% to $132.9 billion, while non-financial FDI contracted by 0.4% to $110.2 billion. The total value of newly signed overseas contracts was $255.5 billion (down 1.8% year on year), $200 billion of these were in infrastructure. Both construction and water conservancy sectors saw double-digit growth.
The past year has also been one marked with both challenges and opportunities for SINOSURE. We combated COVID-19 by performing our countercyclical role fully with the total amount insured exceeding $700 billion, a 15.5% expansion. We provided support for 147,000 customers (up 24% year on year), among whom 116,000 were SMEs (up 32% year on year), with a total export volume of $100 billion (up 41% year on year). The penetration rate rose by 2.5 percentage points to 22.4% and our clients obtained trade financing of more than CNY310 billion through our policies. For FY2020 SINOSURE achieved solid financial results with all of the threshold targets of risk control and business operation met.
In response to the COVID-19 pandemic, SINOSURE remained focused on helping exporters stabilise production and operations, prevent and mitigate credit risks as well as protecting global supply chains. We strengthened our support for import prepayments with the aim to secure imports of epidemic prevention supplies. In addition, we also enhanced the support for pre-shipment risks. Reinforced support can be also seen in leading enterprises that played crucial roles in global supply chains as well as new business modes such as cross-border e-commerce. Our clients were also provided with full process and multifaceted risk information services, which were backed by our credit information database that covers more than 200 million overseas enterprises and our risk warning system that allows dynamic risk monitoring. We improved the efficiency of claims settlement and prioritised those caused by the pandemic. The average processing time of short-term claims was shortened considerably to a historical record.
The way forward
While we cannot ignore imbalances among regions, world trade is on a path of recovery. Despite this, we should also be glad to see the progress made in mass vaccination. Regional cooperation (such as RCEP, CAI) will be another shot in arm that helps us walk out of the woods. The pandemic has demonstrated that multilateralism is the only cure in face of a global challenge. That being so, it is reasonable to foresee a bright future.
Recently, China set its GDP growth target as above 6% for 2021, from which China will step into its 14th Five-Year Plan period featuring ‘fostering a new development paradigm with domestic circulation as the mainstay and domestic and international circulation reinforcing each other.'
"Regional cooperation (such as RCEP, CAI) will be another shot in arm that helps us walk out of the woods. The pandemic has demonstrated that multilateralism is the only cure in face of a global challenge. That being so, it is reasonable to foresee a bright future"
Cai Xiliang, President, Sinosure
The country’s connection to the world economy will also be further cemented in the new period. As an ECA with the mission of serving an open economy and at the same time being a market-driven financial institution, SINOSURE will focus on the following aspects in pursuit of high-quality growth:
As a responsible ECA, SINOSURE aligns its strategy with the nation’s commitment of carbon neutral. Currently we are conducting research on climate change-related risk management and its global practices with the purpose of better integrating environmental aspects into our assessment. In addition, viable policies and actions will be carried out to assist our clients and stakeholders with their green transformation. Risk concentration management is another focus. We will work on the promotion of the application of the ‘Debt Sustainability Framework for Participating Countries of the Belt and Road Initiative’ to ensure the sustainable and high-quality development of BRI.
Business processes reform
SINOSURE is taking efforts to optimise its core business processes through upgrading its internal rating, pricing and credit limit setting models. We are also focusing on the application of our dynamic risk monitoring system throughout the business flow of marketing, underwriting, claims and recovery, with the aim of obtaining multidimensional risk analysis results.
International exchange and cooperation
International relations are of great significance to SINOSURE. We expect substantial cooperation with other export credit insurers with RCEP being in place and CAI in the pipeline. We will also attach importance to Berne Union activities as always and play active roles in the Union reform, events hosting, personnel exchange, and expanding the influence of the credit insurance industry.
No winter lasts forever and every spring is sure to follow. The pandemic will one day be a thing of the past. The year 2021 marks the 20th birthday of SINOSURE. Embracing both the challenges and opportunities in the post-epidemic era, we wish to work alongside our international colleagues to make a contribution to world recovery.