China's small and medium-sized enterprise (SME) exporters are expected to have lower business risks in 2005, as the nation's sole export credit agency vowed to lift the insurance premium by some US$8 billion.

China Export and Credit Insurance Corporation (Sinosure) Assistant General Manager Zhang Weidong said: "We will increase our support to competitive Chinese exporters, including SMEs, and plan to insure US$20 billion worth of exports in 2005."

That will be more than 3.3 per cent of China's expected exports next year - based on an estimated export volume of US$600 billion in 2005.

Sinosure has underwritten exports of US$9.5 billion from January to September and is expected to chalk up US$12 to 13 billion for the full year, according to Zhang.

This compares with last year's US$5.71 billion.

Sinosure, which will celebrate its third anniversary on December 18 in Beijing, has the ambitious goal of raising the insurance coverage rate to between 10 and 15 per cent by 2010, a rate matching that developed countries.

Zhang said about 70 per cent of Sinosure's clients are SMEs and the insurer will further improve efforts to help control risks and enter new markets.

A host of industries such as shipbuilding and auto-making, and a raft of exports including machinery, home electric appliances, textile products and motorcycles are at the top of Sinosure's insurance list.

Zhang added that agricultural enterprises which plant, process and export are also a priority of his company's business.

Sinosure is willing to insure soybean, grain, cotton, fruit and juice exports.

Zhang said export credit insurance is a cost-effective way for SMEs to reduce their vulnerability on the uncertain international market.

For short-term insurance that runs for less than one year, insurance costs average at 0.7 to 0.8 per cent of the exports' value with the lowest rate standing at 0.4 per cent.

Zhang said that exporters could collect compensation of 90 to 95 per cent of their exports' value if the business fails.

Exporters having business in Southeast Asia, Latin America, the Middle East and Africa should consider getting insured, he said.

In particular, with the pace of China-ASEAN (Association of Southeast Asian Nations) free-trade agreement, an increasing number of Chinese exporters will make inroads into the ASEAN market.

Striking a note of caution, Zhang called on firms doing business with unfamiliar clients there to be aware of the risks.

Heightened trade disputes between China and some of its major trading partners also pose threats to these vulnerable small players.

SMEs' insurance awareness is generally weak, with many of them having no knowledge of export credit insurance.

He urged SMEs to update their financial operating mode, which regards insurance expenses as a cost or even a burden.

In addition, concerted efforts are needed to widen SMEs' financing channels, making it easier for them to obtain funds.

"Cash-starved SMEs usually have no extra money to buy insurance policies," he said.

Sinosure is co-operating with domestic and international banks and financial institutions to offer credit for SMEs in a bid to resolve this situation.

Sinosure was established in late 2001, shortly after the country's accession to the World Trade Organization.

(China Daily November 11, 2004)