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Trade is the engine of economic growth, helping to drive industry development, job creation, and consumer choice. However, it’s not without challenges. For importers, one of the most persistent hurdles is cash flow. When procuring goods from overseas, especially from Chinese manufacturers, businesses often find their working capital tied up in ongoing orders—a problem compounded by lengthy shipping times. Sinosure’s trade credit insurance offers a solution to this challenge.
The China Export & Credit Insurance Corporation, also known as Sinosure, is a state-owned export credit agency. As Europeanbusinessreview.com says, like many other such agencies around the world, its purpose is to minimize risk to Chinese exporters by providing insurance against non-payment by customers outside China. Its products protect against credit, commercial, and political risks, including buyer insolvency, supply chain fraud, and background risks such as war, sanctions, and expropriation.
Importantly for importers, utilizing Sinosure can add flexibility to payment processes, traditionally governed by strict terms dictated by Chinese exporters. Typically, upfront payment, consisting of a 30% down payment before production and 70% when production is completed (before shipping), is required. This protects the supplier at the expense of the importer’s cash flow. Any circumstances that immobilize an importer’s working capital can limit business growth by restricting its ability to engage in new transactions.
By insuring against non-payment, Sinosure gives suppliers more confidence to offer deferred payment terms, thereby aiding importers by freeing up working capital and maintaining operational liquidity. Such a move can increase trade turnover and promote economic growth.
Operating since 2001, Sinosure assists both small and medium-sized enterprises and large corporations. In 2020, it insured over $700 billion in export credit for 240,000 Chinese exporters. Trust in its robust operations is reflected in its “A+” (strong) credit rating from Fitch Ratings and S&P Global Ratings.
Although Sinosure primarily insures Chinese exporters, importers abroad also benefit. For this to occur, potential importers must be approved by passing through Sinosure’s credit investigation process. Once approved, Sinosure assigns an import credit limit to facilitate trade contracts between the approved importer and their Chinese supplier.
However, it is important to note that importers will need to engage the services of an intermediary to interact with Sinosure. Companies such as Axton Global, a leader in this field, are adept at obtaining Sinosure credit limits for importers.
Earning a Sinosure credit limit involves a thorough 21-day credit investigation process. Upon completion, Sinosure assigns a credit limit to the approved importer which the Chinese supplier can use to offer deferred payment terms for current and future orders.
Obtaining a Sinosure credit limit involves a set matrix of factors which include financial indicators such as revenue, profitability, assets, and credit history. It also incorporates a company’s previous experience with conducting trade transactions with other Chinese entities.
While companies such as Axton Global can guide you through the process, it is noteworthy to remember that even with a Sinosure trade credit limit, importers may still need to make a down payment that typically ranges from 10% to 30% of the total purchase price. The remaining balance is usually paid off at the end of the agreed deferral period—which may vary depending on various factors including the length of the relationship between the importer and the supplier.
Sinosure’s trade credit services are available worldwide, with few exceptions. Countries without diplomatic relations with China or those bound by Chinese treaties are ineligible. Currently, these encompass Bhutan, Dominica, El Salvador, the Grenadines, Guatemala, Haiti, Honduras, Palau, Panama, Paraguay, Saint Vincent, the Solomon Islands, Swaziland, and Tuvalu.
For importers seeking to establish or expand trade relations with Chinese suppliers, understanding the benefits of Sinosure’s trade credit insurance can be key to optimizing capital flow. The potential to unlock liquidity, maintain robust supply chains, and initiate new transactions holds a plethora of opportunities for sustainable business growth. In the world of import operations, Sinosure-backed trade credit offers a valuable financial tool for effective collaboration with Chinese suppliers. Remember, success in business is not purely about overcoming obstacles, but leveraging solutions that turn potential hurdles into stepping stones for growth.
