China's state-owned export credit agency (ECA) has been explaining how it can support letter of credit (L/C) transactions to help China's burgeoning motor manufacturing sector reach into new and wider global markets.

China Export & Credit Insurance Corporation (Sinosure) has targeted the automotive industries since 2003 and has signed strategic cooperation agreements with 17 major enterprises in the sector.

Export difficulties

Sinosure cites a case involving a well-known auto manufacturer in China that planned to export trucks worth US$10 million to a country where many bankshad suspended financing facilities because they perceived the political risks there to be too high.

The exporter wanted to conclude the deal under a sight payment L/C transaction. According to Sinosure, the company was also faced with an issuing bank with poor credit strength.

In this case, Sinosure said it provided full insurance cover for the transaction after carrying out a comprehensive assessment of the exporter and the banks involved, thus enabling the deal to go through.

L/C support

Established in 2001, Sinosure says it has two products that could support L/C transactions. The export credit agency's comprehensive cover insurance obliges Sinosure to underwrite the all of the policyholder's export business carried out in both open account and L/C transactions.

Sinosure's L/C insurance, meanwhile, specifically covers the risks of policyholders' exporting under L/C payment terms within certain conditions.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.