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Hong Kong government-backed ECIC (Export Credit Insurance Corporation) has announced a partnership with five banks HSBC, DBS HK, Hang Seng Bank, BOCHK and Bank of East Asia to offer exporters better coverage for payment defaults by private mainland Chinese firms. The risk-sharing arrangement will make it easier for Hong Kong firms to obtain credit insurance and bank financing for trade with the mainland.
ECIC already offers credit insurance to exporters trading with listed mainland firms, which have to disclose their financial information. The insurer has, however, been unable to provide cover for private enterprises because of a lack of disclosure of credit and financial information.
Under a new partnership with banks (HSBC, DBS HK, Hang Seng Bank, BOCHK and Bank of East Asia), they will share their credit assessments of private enterprises in the mainland with ECIC when a Hong Kong exporter wants to buy credit insurance or export loan cover for certain mainland buyers.
This will give ECIC access to more credit information about private mainland buyers, and make it easier for it to approve credit insurance for local exporters looking to sell their products in areas such as the Greater Bay Area.
The so-called “Risk Sharing Arrangement on Domestic Risks in the Mainland” scheme will enable the banks and ECIC to share the risk of default equally and split the compensation in case a mainland buyer fails to pay the Hong Kong exporter.
The maximum compensation has been capped under the scheme at HKD 100 million (USD 12.9 million) per buyer group. The total credit ceiling of the scheme is set at HKD 10 billion, a level that ECIC will review after one year.
The scheme is expected to make credit insurance and export loan approval faster and more efficient for Hong Kong exporters, who will also find it easier to obtain bank financing as well as obtain accounts receivable purchase facilities in Hong Kong – thereby encouraging more trade activity with the mainland.
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