Research On Risks And Risk-Prevention Of Letter Of Credit For Xi'an Export Enterprises Under Financial Crisis

Letter of credit, a main means of international settlements for trade, have served as an important channel to make profits in export for foreign trade enterprises in Xi'an. With bank credit for guarantee, documentary credits have been the most secure and least risky settlement means.After the global financial turbulence caused by American sub-prime mortgage crisis, great changes have taken place in the economic situation in and abroad in 2009. the continuous drop of exchange rate between US dollars and RMB from year 2007 to 2009 also exerted bad influences on timely and full collection of goods payment for exporters; and the annexation between banks and the uncertainty of future economic development resulted in great worries and tension in exporters about bank guaranteed payments under documentary credits. Moreover, the new rules of UCP600 have been formally implemented since 2007, the influence of which is rather different from UCP500. As a result of all the new changes, export enterprises in Xi'an are faced with unprecedented challenges and risks when they make settlements by documentary credits. bank credit is confronted with great challenges currently when economic environment in and abroad experiences dramatic changes, and documentary credits are not as secure as before. Meanwhile, problems and risks exist in practical operations, and export documentary credits are easily refused. Therefore, how to prevent these risks have been the key for export enterprises in Xi'an to safely participate in international competitions, and to gain sustainable development in changeable international financial markets.By combining qualitative study and quantitative study and making horizontal and vertical comparisons, the article explores credit risk,operation risk and market risk of documentary credits under new situations in export enterprises in Xi'an and raised relevant solutions based on current practices and related theories on documentary credits and their risk prevention, so as to strengthen risk consciousness of enterprises, to prevent risks in timely and full collection of goods payment, and to reduce refusal and economic losses caused by refusal. Meanwhile, liabilities of banks are discussed in risk-prevention for Xi'an export enterprises and the approaches to prevent risk are concluded, such as paying attention to the whole and dynamic track, feasible and consistent procedures, careful examination of details, canonical and self-disciplined behavior, trustful corporations and timely communication and so on.