J.P. Morgan has signed a groundbreaking agreement with China’s Export & Credit Insurance Corporation (Sinosure), China's only policy-oriented insurance company specialising in export credit insurance.
Under the terms of the Export Credit Insurance Letter of Credit (LC) Policy Agreement, J.P. Morgan will provide a wide range of trade finance solutions to Chinese exporters of goods and services. This should help improve their efficiency and reduce risk, and enable them to enter new markets they previously could not consider due to a lack of insurance cover.
For its part, state-run Sinosure, which currently covers over $150 billion of short-term transactions, will provide insurance cover to J.P. Morgan on export LCs issued by financial institutions globally in favour of Chinese companies. The financing tenor of the LCs has also been increased from one to two years.
“We will provide Chinese exporters with a one-stop shop to access financing and risk mitigation. The tenor is also extended from one to two years, so more goods and more transactions can fall under this programme,” said Daniel Cotti, global trade executive, J.P. Morgan treasury services. According to the agreement, Chinese enterprises which previously had to seek financing from banks and insurance services from Sinosure separately, will now be able to obtain financing and risk mitigation from J.P. Morgan, which will in turn obtain insurance cover from Sinosure.
“This new export credit insurance policy agreement is a milestone for J.P. Morgan in China. As the first bank headquartered outside of Asia to sign such an agreement with Sinosure, J.P. Morgan will be instrumental in enhancing the way Chinese companies access trade finance, making it easier, faster and cheaper for Chinese exporters to grow their business abroad,” said Cotti.
The partnership should also help support Chinese companies internationally by streamlining their export product processes and structures and enhancing the manufacturing industry’s growth prospects. “Because there is currently no private insurance market in China, there has been a gap between the trade financing demands of Chinese exporters and the willingness of banks to support their business. This initiative reduces that gap and ultimately bridges the divide, ensuring that Chinese exporters are able to continue growing their business internationally,” said Kao Fang Ming, head of trade finance, China, J.P. Morgan treasury services, who joined the bank in August of last year.
“This initiative with J.P. Morgan, the first bank headquartered outside Asia to partner with Sinosure, will be instrumental in our efforts to further develop China’s trade finance market. The partnership will help Chinese exporters grow their business by simplifying the entire export credit insurance process. By streamlining the many processes involved in cross border trade, it will leave Chinese companies better placed to focus more intently on the strategic growth of their business into new and emerging markets,” said Zhou Jian, deputy general manager of Sinosure, in a statement.
Sinosure began operations on December 18, 2001, and has a nationwide service network of 18 branches, 6 business management departments and 28 offices, with a representative office in London. It is mandated to promote Chinese exports and investments, especially exports of high-tech or high value-added capital goods, by means of export credit insurance against non-payment risks, and providing services in financing, information and receivables management.