SCIO press conference on promoting virtuous cycle of finance and economy amid high-quality development
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E-mail China.org.cn, March 8, 2022
Red Star News:
China's import and export of cargoes and services contributed over 20% of GDP last year. In recent years, the financial sector has enhanced support to exports and offered them a lot of credit funds. So my question is, how does the financial industry support high-quality trade development? Are they equal to export subsidies in real terms? Thank you.
Guo Shuqing:
They're definitely not subsidies. They are all commercial banks and should make money. Their profits, especially those of large banks, grew significantly. Let's give the floor to our authoritative expert Ms. Hu Xiaolian to answer the question.
Hu Xiaolian:
I'll make an illustration for the question. In the past two years, against the backdrop of the severe pandemic globally, China's exports have maintained great momentum, showcasing the strong resilience of China's foreign trade. China's exports have played an active role in stabilizing global products and industries and ensuring a stable supply. It is indeed difficult to achieve the accomplishment as foreign enterprises have also faced many common obstacles, such as the pandemic. Meanwhile, many uncertainties exist in the industrial and supply chains, and transportation also faces difficulties. Recently, the surge of commodity prices, the turbulence of international markets, changes in exchange rates, and the risk of geopolitics have all brought significant challenges for foreign trade enterprises to maintain steady growth.
The CPC Central Committee and the State Council have attached great importance to it, as keeping foreign trade stable is an important part of ensuring stability on the six fronts and security in the six areas. Offering financial support for foreign trade is the major responsibility and task of the Import-Export Bank of China. We have always put supporting high-quality development of foreign trade as a key component of financial services, and made efforts in the following aspects.
First, we scale up the allocation of financial resources to foreign trade enterprises to ensure their funding needs can be met.
Second, we prioritize the development of medium, small, and micro foreign trade enterprises. They are significant contributors to China's exports, so we rely on fin-tech to handpick eligible enterprises with export competitiveness as the candidates of our support programs.
Third, we mainly keep a close watch on the development of the new mode of foreign trade as we render financial support. New foreign trade modes are a new driving force. Such new modes as the centralized procurement, overseas warehouses and cross-border e-commerce pose challenges to financial institutions. Mortgages, a traditional financing means, can hardly meet the funding needs of new foreign trade modes. This requires us to keep innovating products.
Forth, to prop up foreign trade, we must reinforce its foundations to sharpen the edges of our foreign trade commodities in the global market and strengthen the foreign trade industry. In addition, we have paid extra attention to supporting the development of the foreign trade industry and promoting the quality and efficiency of both upstream and downstream of the foreign trade industry.
The four aforementioned endeavors have given full play to the role of policy-backed finance in bolstering the high-quality development of foreign trade. But, of course, some reporters may ask, what is the difference between policy-backed finance and commercial finance in supporting foreign trade? Just now Mr. Guo said that foreign trade is not a franchise business and policy-backed finance has two characteristics in supporting foreign trade:
First, policy-backed financial support tends to come when foreign trade companies face difficulties. The more dire the situation they face is, the more we need to provide support. So, I think banks can provide solid support for foreign trade enterprises when they are in straits amid an uncertain market.
Second, we have maintained good cooperation with industrial partners. Through industrial collaboration, we can integrate the strength of policy-backed finance and commercial finance. For example, we now support small and micro-sized foreign trade enterprises to turn to on-lending and sign on-lending deals with commercial, financial institutions. Since commercial, financial institutions have many outlets and have built close contact and relationship with many small and micro-sized enterprises, we work with them to provide financial support for such enterprises.
Just now, a reporter asked whether such support is a subsidy. What is a subsidy? According to the definition of the WTO, first, it depends on whether the financial resources provided by financial institutions are indistinguishable or whether financial institutions only provide financial credit support for a particular type of enterprise, a specific sector, or a particular type of products. Second, whether the loan interest rate is far lower than the market average level. According to the definition, the financing support we provide to foreign trade enterprises is by no means a subsidy. Chinese policy banks, especially official export credit institutions, provide support to foreign trade enterprises in the same vein as their foreign counterparts and in accordance with international practice.
The enterprises we support do not belong to a particular type or a particular sector. We support both large and small and medium-sized enterprises; we support both Chinese and foreign-funded enterprises without discrimination. We offer interest rates in line with market principles. Export and import banks also get capital from the financial market. Our financing cost is not low, roughly the same as the bond rates of the ICBC and the CCB in the financial market. We ensure our business covers the cost and runs with a low-profit margin. Under such circumstances, we will not provide subsidies to foreign trade enterprises at interest rates much lower than the market average. This is my answer. Thank you.
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