Do foreign trade attention! This risk map please accept


Published:

2023-04-12

Recently, the 2018 Country Risk Analysis Report (hereinafter referred to as "Risk Report") released by China Export and Credit Insurance Corporation points out that the current unilateralism, trade protectionism, and anti-globalization thinking constantly have new manifestations and pose serious threats to the global economy and trade, suggesting that exporters should strengthen risk prevention in overseas markets and obtain the latest risk information, while actively exploring diversified markets and diversifying country Policy risk. It is understood that this is the 14th time for CIGNA to release the Country Risk Analysis Report.

Recently, the 2018 Country Risk Analysis Report (hereinafter referred to as "Risk Report") released by China Export and Credit Insurance Corporation points out that the current unilateralism, trade protectionism, and anti-globalization thinking constantly have new manifestations and pose serious threats to the global economy and trade, suggesting that exporters should strengthen risk prevention in overseas markets and obtain the latest risk information, while actively exploring diversified markets and diversifying country Policy risk. It is understood that this is the 14th time for CIGNA to release the Country Risk Analysis Report.

Global risks have risen

The 2018 Report is divided into two volumes. The first volume is "Country Risk Analysis Report 2018 - Country Risk Ratings, Sovereign Credit Risk Ratings and Risk Analysis of 62 Key Countries", which covers "political risk", "economic risk", "business environment risk" and "business environment risk". It analyzes country risks in four dimensions: "political risk," "economic risk," "business environment risk," and "legal risk," and elaborates on the reasons for rating changes. The next volume is "Country Risk Analysis Report 2018 - Global Investment Risk Analysis, Industry Risk Analysis, Global Corporate Insolvency Risk Analysis", which shows the risks faced by Chinese enterprises in foreign investment from multiple dimensions and levels, such as country, industry and enterprise, with a large number of cases to help readers understand the relevant risks and provide control recommendations.

"Overall, the level of global country risk has increased since the second half of 2017. It is mainly manifested in four aspects. First, political risks continue to rise, second, the divergence of world economic development has intensified, third, financial market risks are likely to further accumulate, and fourth, trade frictions are likely to be prolonged." Guo Xinshuang, deputy general manager of China Credit Insurance, said when interpreting the report.

According to the results of China Credit Insurance's country risk ratings, there were 178 countries with little change in country risk levels and stable ratings in 2018. The ratings were upgraded for seven countries, including North Korea, South Korea, Thailand, Greece, Portugal, Colombia and Djibouti, mainly due to the easing of geopolitical tensions in some regions, increased political stability and reduced uncertainty in some countries. The ratings were downgraded for seven countries, including Jordan, Qatar and Turkey, due to the expansion of contradictory differences in some Gulf countries and the possible reduction in the efficiency of national risk management, etc.

The number of countries with unchanged sovereign credit risk levels and stable ratings is 168. The ratings of six countries, including Singapore, Albania, Montenegro, Russia, El Salvador and Palau, were upgraded, and seven countries, including Turkey, Yemen and Ecuador, were downgraded. In terms of country risk and sovereign credit risk outlook in 2018, there are 13 countries with "positive" country risk outlook, 13 with "negative" and 166 with "stable". The outlook for sovereign credit risk is positive for 25 countries, negative for 23 countries and stable for 133 countries.

Increased abandonment of goods by U.S. buyers

As the only policy insurance company in China, China Credit Insurance has been actively performing policy functions to serve the development of open economy and real economy. As of September 2018, China Credit Insurance has supported foreign trade and investment of USD 3.5 trillion, provided export credit insurance services for tens of thousands of export enterprises, paid USD 10.94 billion in compensation to enterprises, and led 260 banks to finance over RMB 3.2 trillion for export enterprises.

According to the calculation of the Development Research Center of the State Council, in 2017, export credit insurance boosted exports by more than USD 600 billion, contributing 4.9% to GDP and driving employment of more than 15 million people for two consecutive years. From this perspective, China Credit Insurance's underwriting landscape is not unlike another point of view for risk surveying of foreign trade enterprises.

According to CIGC, its underwriting and claims settlement in different regions can also provide a glimpse of the main risks in different regions. For example, data shows that in the first three quarters, CIGC underwrote US$48.4 billion in Europe, up 10.5% year-on-year. In general trade exports, the economic growth rate of individual countries is down and trade fraud cases are starting to emerge, which are more difficult to identify. In terms of overseas construction contracting and overseas investment, the strengthening of foreign investment acquisition review in individual countries may slow down the pace of Chinese investment in the EU.

China Credit Insurance underwrote US$138.99 billion in Asia in the first 3 quarters of this year, up 20.9% year-on-year. In terms of general trade exports, the overall trade demand of major oil-producing countries in West Asia tended to stabilize in 2018 due to the stabilization of oil prices, and the underwriting scale increased slightly; the economic growth rate in Central Asia stabilized, and the overall trade and underwriting scale was relatively stable; the underwriting scale in Southeast Asia grew steadily, and the regional average reported loss premium ratio decreased slightly year-on-year; the reported loss claims in South Asia were mainly concentrated in the pharmaceutical and chemical industries. In addition, the business risk of light industry and agricultural products industry has increased. In overseas engineering contracting and overseas investment, political changes in some Asian countries have increased the political risks faced by Chinese enterprises in project implementation, and the political situation and policy direction of the relevant countries have been adjusted, and political risks are worthy of attention.

In the first three quarters of this year, China Credit Insurance underwrote US$26.86 billion in Africa, down 2.6% year-on-year. However, with the gradual implementation of the "Eight Actions" proposed by the Forum on China-Africa Cooperation, China-Africa economic and trade cooperation will enter a new phase.

In the first three quarters of this year, China Credit Insurance underwrote US$23.04 billion, up 35.9% year-on-year. In general trade exports, the overall economic stabilization and recovery in Latin America has led to a significant recovery in the amount of credit limit applications and underwriting, and a significant improvement in business quality.

In North America, in the first three quarters of this year, China Credit Insurance underwrote US$42.56 billion, up 7.0% year-on-year. In general trade exports, the bankruptcy situation of the U.S. department store retail industry continued to deteriorate, buyer defaults increased significantly, and risk indicators rose year-on-year. Since the trade friction between China and the U.S., there has been an increase in the number of cases where U.S. buyers abandoned goods due to their inability to pay their own import tariffs, or poor downstream sales due to rising costs, and then maliciously defaulted on payments. For example, a drone exporter in China was defaulted by the U.S. buyer, and after an investigation by China Credit Insurance, it was discovered that the buyer had entered bankruptcy in September 2017. in August 2018, China Credit Insurance paid over $10 million to the company. The data shows that year-to-date, nearly 600 cases were paid out under the U.S. buyer, with a cumulative payout of $110 million to the client, up 9.9% and 9.6% year-on-year.

"In terms of overseas investment, after the implementation of the Foreign Investment Risk Review Modernization Act in the U.S., Chinese companies will face more extensive investment reviews, longer review cycles and a more stringent reporting system. This will expose Chinese companies to greater uncertainty in their investments in the U.S." Guo Xinshuang said.

Three moves to prevent foreign trade risks

At present, unilateralism, trade protectionism, anti-globalization thinking continues to have new manifestations, posing a serious threat to the global economy and trade. Not long ago, in the State Council Information Office introduced and interpreted the "facts and China's position on the economic and trade friction between China and the United States" white paper press conference, the Ministry of Commerce International Trade Negotiator and Vice Minister Fu Ziying said that in the face of the problem of risk associated with entering emerging markets, the government will follow the internationally accepted rules to enable export enterprises to use more export credit insurance tools to effectively reduce the risk of enterprises.

It is understood that China Credit Insurance has set up Credit Assessment Center and Country Risk Research Center in 2003 and 2013 respectively, whose functions are to provide technical and intellectual support for enterprises to reasonably avoid trade and investment risks. General Manager Wang Tingke of China Credit Insurance said that the company will continue to expand the coverage of export credit insurance for enterprises' exports, foreign engineering contracts and foreign direct investment, and further expand the financing facilities of export credit insurance policies to better protect Chinese enterprises' "going abroad".

In view of the current risk situation in overseas markets, China Credit Insurance has put forward risk prevention suggestions for exporters:

Firstly, it is suggested that exporters should make full use of export credit insurance to ensure the safety of foreign exchange collection, communicate with China Credit Insurance's local business institutions in a timely manner to obtain the latest risk information and jointly sort out and investigate business risks.

Second, it is recommended that exporters actively explore diversified markets to diversify country-specific policy risks. Be cautious of new large orders in the short term as well as the needs of small and medium-sized buyers; overseas investments need to pay more attention to due diligence and risk assessment, and strengthen risk prevention by taking out overseas investment insurance, etc.

Third, for exporters with business needs to the U.S., if the type of exported goods belongs to the scope of levy/pre-levy tariffs, it is recommended that exporters should negotiate with the buyer as soon as possible before arranging shipment on whether the goods will continue to be shipped, the subject of the levy and the specific way to bear the tariffs; and entrust China Credit Insurance to recover the compensation as soon as possible after the risk occurs. Considering that the U.S. legal environment is more sound and the efficiency of litigation is higher, for the buyer who maliciously defaults on payment on the grounds of tariff increase, it is recommended that exporters increase their recovery efforts and start legal procedures if necessary to effectively safeguard their legitimate rights and interests.

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