Study On Export Credit Insurance's Role In Protecting China Against Financial Crisis And Its Developing Counter Policy

Export Credit Insurance (ECI) is a special export-promotion policy established by a government in order to guarantee the remittance collection of export enterprises. It takes foreign buyer credit risk as its insurance subject, the insurer is mainly responsible for the loss caused by the commercial risks which the export enterprises will face included the buyer insolvency, default payment or reject the goods and other commercial risks, and by the political risk of the buyers'country.After China's reform and opening up, in the 1980s, as the letter of credit was being used in more than 85% of export trade, export credit risk does not get enough attention. After 1990s, with increasing export competition, exporters, in order to provide importers more favorable terms of trade, were using the letter of non-credit included telegraphic transfer, collection and O/A more and more often. In the international trade, letters of credit was only used in 20% of the conditions. In this situation, the buyer risk is increasing, so the management of the export exchange credit risk is necessary. 2008, after the international financial crisis caused by the American loan crisis, with the setback of the real economy in China's main export trading partners, China's export trade was under attack, The credit risk and the Foreign exchange settlement risk which confronted China's export enterprises were rising. When facing the Foreign exchange settlement risk brought by the financial crisis, some exporters take the lead in the use of internationally accepted "export credit insurance" to avoid the risk in foreign trade, the important role of China's export credit insurance has become increasingly prominent. China's export credit insurance is not only effective in protecting the interests of export enterprises exchange earnings, but also strengthen risk management ability and crises defending ability of China's export enterprises, and greatly enhance the brand of Chinese enterprises and China's international competitiveness.Although China's export credit insurance performed well in response to the financial crisis, compared with other countries it still lags far behind. At present, export credit insurance penetration rate in Western Europe is 20% -25% or even 34% in France. But at the end of 2008, China's export credit insurance coverage on the general trade exports was less than 7%; the coverage on the total diameter of trade exports was only 3.2%, only less than 3% of total export enterprises participated in the export credit insurance. All of these were against the rapid annual growth of China's foreign trade. Therefore, to systematically study the role export credit insurance played in response to financial crisis, to analyze the problems of China's export credit insurance at this stage, and to table proposals to promote the development of China's export credit insurance has important theoretical and practical significance.This article is divided into four chapters to state the function of China's export credit insurance in protecting China against financial crisis and its developing countermeasures on the basis of related reference documentation. The first chapter states the significance of topic selection and the paper's framework then outlines the development of domestic and foreign export credit insurance theory and related research results.The second chapter is the introduction of export credit insurance. Based on the brief introduction of the concepts, classification, origin and development of export credit insurance, this chapter then analyzes in details its characteristics, function as well as its national management mode and its advantages and disadvantages. The main features of export credit insurance are its non profitability, high risk management requirements and high degree of government's participation. The function of export credit insurance is to guarantee the remittance collection of export enterprises export enterprise, to help enterprises choose flexible settlement, to support corporate finance and to help enterprises to obtain buyers information, etc.The third chapter deals with the role which China's export credit insurance played against the financial crisis. This chapter firstly gives a brief introduction of the evolution of the financial crisis, and then analyzes its causes. Second by comparing the data, the chapter explains the negative impact of the financial crisis on Chinese exports, including: export volume growth rate decreased, the risk of export business exchange earnings increased, exchange rate increased and as a result the decline in exports. Finally, this chapter concludes a comprehensive summary of the role China's export credit insurance played against the financial crisis, based on the theory and case studies .That is to say China'export credit insurance responded positively to the needs of enterprises protecting their interest, expended the financing channels, enhanced the risk analysis providing a reference for the export enterprises, and increased Involved Industries of support reducing the loss of enterprises. This will not only expand the scale of the enterprise's international trade, but will also promote the national "going out" strategy to enhance the confidence and ability to invest overseas and to withstand risks, which will greatly enhance the international competitiveness of Chinese enterprises and Chinese brands.The fourth chapter is the problems in the development of China's export credit insurance and the countermeasures and suggestions. This chapter firstly introduces the development of China's export credit insurance and the main achievements of the process, and point out its current problems. First one is lack of financial support which limits the expansion of its size. Second one is lack of legal system, the nature, powers, duties commitment of export credit insurance institutions are not clearly defined, so that export credit insurance policy is difficult to play a role. Third one is poor services of export credit insurance agency services, high rates, long approval cycles, and weak country risk evaluation capacity. Fourth one is insufficient broadcasting, so that exporters are lack of consciousness for insuring. The end of chapter puts forward suggestions on how to develop China's export credit insurance fast and healthily on three levels included the level of the government, the level of export credit insurance agencies and the level of insurance companies, aiming at the problems mentioned above . First, from the government level, the government should increase financial support for export credit insurance, and improve its legal regulatory and security. Second, from the level of export credit insurance institutions, they should improve their service quality, expand insurance coverage, specifically reduce the costs rate, shorten the coverage period, give more publicity to the importance of export credit insurance, and make full play to the financing functions of export credit insurance. Finally, from export enterprise level ,they should raise awareness of the credit risks ,attach importance to the role of export credit insurance, participate actively in the insurance, and strengthen the risk management to reduce the probability that a risk will materialize.China's export credit insurance started late, the role of play is still relatively limited. But with the world's increasingly fierce competition in export trade and great development in operation mode of China's export credit, the effect of export credit insurance to promote Chinese export trade will be more and more obvious. In the future development ,we should combined with China's actual situations and learn from the experience of developed countries in order to further promote the sound development of China's export credit insurance and to make it better for the country's export trade policy and export business service.