Study On Using Export Credit Insurance In China To Promote Export Trade Under Financial Crisis

Since joining the WTO, China’s export trade has developed rapidly. Theexports increased from USD266.1billion in2001to USD1428.5billion in2008.With the rapid development of China’s export, bad debts of Chinese exportedenterprises increase also rapidly. With the outbreak of the internationalfinancial crisis, worldwide economic growth generally slows down, demands ofconsumption and import reduce significantly, trade protectionism is prevalent,then the exported environment which enterprises faced with has deterioratedsharply and the exports declined. On the other hand, the financial crisis makesthe commercial credit risks and the country’s political risks of China’s exportenterprises increase significantly, bad debts of China’s exports are increasingas the international financial crisis becomes aggravated. Degradation ofexported environment and dramatic increase of corporates’ exported baddebts have seriously affected the enthusiasm and competitiveness ofenterprises’ export, as well as hindering the further development of exporttrade. As one of the means to support export principally allowed by "Subsidiesand Countervailing Measures Agreement" of WTO, export credit insurance haswidespread national attention. Many national governments have welldeveloped export credit insurance to mitigate the bad impacts of financial crisis,and to promote export trade.Although China’s export credit insurance started late, coverage ofSINOSURE has increased and export credit insurance has grown rapidly sincethe establishment of SINOSURE, especially since the second half of2007thatthe international financial crisis has led to the increasing credit risks of Chineseoverseas buyers and foreign banks, as well as increasing national politicalrisks. It shows that the insured amount grows rapidly, permeable rate andexport contribution raise significantly, and underwriting for SMEs, emergingmarkets&non-credit business grows rapidly. With great achievements of theexport credit insuranc, there are also high paid rate, low trade financingpercentage under the export credit insurance, low underwriting ratio of keyproducts and markets, poor underwriting technology, lack of legal protectionand so on. They hinder the further development and exported promotingeffective of export credit insurance. Then uses annual related data from1989 to2008,this paper build VAR model, useing ADF test,Granger causality test,co-integration test,impulse response function and variance decomposition toanalysis the relationship between China’s exports credit insurance andexport,which is based on the expansion of Hideki Funatsu model. This thesisreaches the following conclusions through theoretical and empirical analysis.First, export credit insurance can promote the development of export trade,and the effect is more visible under financial crisis, but with time-lag effect.Second, the correlation between financial crisis and export trade is negative,and the impact of the financial crisis on exports has a time-lag effect. However,on the whole, although export trade has been impacted by export creditinsurance and financial crisis, it is impacted by its own factors to the maximumextent. Third, the response of coverage amount of export credit insurance tofinancial crisis has time-lag effect. Financial crisis may make coverage amountof export credit insurance grow in the short term, but the impact graduallytends to zero in the long term. At last, with theoretical&empirical researchfindings, and combined with the impact of international financial crisis onChina’s export trade, as well as problems of export credit insurance, this thesisproposes countermeasures to develop China’s export credit insurance forpromoting export trade under international financial crisis.