Information on Chinese credits

Preferential credits allowed by the Government of the Public’s Republic of China and the Export-import bank of China
(Informative note)
 
 
While preparing projects that are to be realized in collaboration with the Chinese side it is necessary to take into account the following information on preferential credits allowed by the Government of the Public’s Republic of China and the Export-import bank of China (Eximbank) aimed to realize these projects.
 
 
1. Preferential credit of the Government of the Public’s Republic of China.
Preferential credit of the Government of the Public’s Republic of China is allowed to friendly states with the purpose to finance projects in which Chinese enterprises participate, which means simultaneous financial support for foreign states and promotion of export of Chinese goods and services to the world market.
Principal demands for the projects:
Executive enterprises (exporters) are to be represented by Chinese companies. Equipment, materials, technologies and services needed for the projects realization are to be purchased with the priority-orientation for Chinese contractors. Not less than 50% of all the equipment should be Chinese made.
Credit volume is to be not less than 20 million Yuan (about 2.4 million US dollars). Loan-debtor is to be represented by the government of credit-subscriber state in the minister of finance’s face.
Preferential credits of the Government of the Public’s Republic of China are allowed at soft interest rates (at the current moment it is about 3%) with the maturity of up to 20 years including the privileged period. Particular credit terms and conditions are considered by the Chinese side according to the project characteristics. Usually the current credit type is allowed under condition excluding tender procedures for these projects.
Credits are allowed in Chinese Yuan.
Parties willing to get preferential government credits should address official applications to the Government of the People’s Republic of China. After the Government of the Public Republic of China has taken principal positive decision on credit allowance interest rate and maturity for the current preferential credit are estimated. Declared specifications are recorded by the Chinese Government and fixed in the intergovernmental frame agreement for preferential credits.
For the preferential credit allowance procedure completion the loan-debtor side should provide the following list of documents (in English or Chinese):
- Application of the loan-debtor state government for preferential credit allowance (in the Republic of Belarus the application is to be signed by vice-prime minister or finance minister and handed over to the Government of the Public’s Republic of China via the Embassy of the Public’s Republic of China in the Republic of Belarus;
- Letter (project conclusion) of the trade-economy department of the Embassy of the Public’s Republic of China in the loan-debtor state (is to be prepared by the Embassy of the Public’s Republic of China in the Republic of Belarus);
- Technical-economic validation summarizing the aims, project contents, investments volume as well as the detailed description of its technical, economic and social aspects (effectiveness);
- Commercial contract or other relevant agreement (in case of absence of agreement intentions protocol is acceptable);
- Information on political and social-economic situation in loan-debtor state (short data – principal exponents);
- Short information about the consumer, registration duplicate, financial accounting covering the period of 3 last years.
Variance between the interest rates of LIBOR (or CIRR) and preferential credit is compensated by the state budget funds of the Public’s Republic of China.
 
 
2. Preferential export shopping credit.
This credit is allowed by the Eximbank for certain projects as well as for a certain term (credit line analogue) during which different projects are being financed within a certain amount of money.
The question about allowing this type of credit to the Republic of Belarus is now being worked out.
Principal demands for the projects:
- Executive enterprises (exporters) are to be represented by Chinese companies. Not less than 70% (variable in accordance with negotiations results) of the whole volume of credit should be spent on Chinese equipment or goods purchase, payment for Chinese companies services;
- Advance payment is needed – 15% of the whole credit volume.
Taking into consideration the previous experience of preferential export shopping credits allowance to the SCO countries the following conditions can be defined as principal: interest rate – 3%, maturity – up to 15 years. Usually the current credit type is allowed under condition excluding tender procedures for projects.
This type of credit is allowed in US dollars.
To get preferential export shopping credits for a certain project the Government of the Republic of Belarus should send its application to the Government of the Public’s Republic of China. After the Government of the Public’s Republic of China has taken principal positive decision on credit allowance, the Government of the Republic of Belarus (Ministry of finance or some other authorized organ) and Eximbank of China sign an agreement defining the interest rate and maturity. After that a credit agreement between Eximbank and loan-debtor is signed.
Loan-debtor (goods importer, foreign bank, ministry of finance or any other foreign state-owned organization recognized by the Export-import bank of the Public’s Republic of China) should provide the Eximbank of China with an official claim for shopping credit along with the following documents:
- Contract project or intentions protocol, analytical report on project completion ability and some other analyzed and confirmed documents.
- Materials on borrowing capacity of debtors, importers and exporters as well as relevant certification documents and financial reports of loan subscribers and warrants.
- Other documents at the Eximbank’s request.
To get this credit provision of the governmental guarantee is needed as well as credit insurance at the Chinese company for export credits insurances (SINOSURE).
In case of getting preferential export shopping credit not for a certain project, but for a range of different projects (credit line opening), the Government of the Republic of Belarus should send an application to the Government of the Public’s Republic of China. The application contains the required credit volume, list of projects noting the advance financing volume which are to be covered by the credit, promptness to provide guarantee of the Government of the Republic of Belarus. After the Government of the Public’s Republic of China has taken principal positive decision on credit allowance, the Government of the Republic of Belarus (Ministry of finance or some other authorized organ) and Eximbank of China sign an agreement defining the interest rate and maturity. After the credit allowance the interest rate is constant for each project.
Afterwards the Eximbank of China signs with the loan subscriber a separate agreement for each project.
Variance between the interest rates of LIBOR (or CIRR) and preferential credit is compensated by the state budget funds of the Public’s Republic of China.
 
 
3. Export credit of the Export-import bank of the Public’s Republic of China for consumers.
This type of credit is allowed by the Eximbank of China to a legal body of an import state. It is oriented to promote export of Chinese machine building, shipbuilding, electro technical production and hi-tech goods and services.
Loan-debtor can be represented by goods importer, foreign bank, ministry of finance or any other foreign state-owned organization recognized by the Export-import bank of the Public’s Republic of China
Contract should meet the following demands:
- Contract price should be over 2 million US dollars;
- Over 50% of all the export goods should be Chinese made;
- Importer’s advance payment should amount above 20% of the whole contract price in shipbuilding and above 15% of the whole contract price in machine building and electro technical spheres.
- Export credit volume for consumers should not exceed 85% of the whole trade contract price and 80% for shipbuilding contracts.
Interest rate for consumers is LBOR (or CIRR) + Eximbank mark (currently – 1-2%). The maturity period for such credits usually does not exceed 12 years preferential period inclusive.
Credit is allowed in US dollars.
To get the current credit loan-debtors are to provide the Eximbank of China with an official whiten application for credit allowance for customers as well as other documents requested by the bank (the same list of documents as for the preferential export shopping credit allowance, tender documents inclusive).
Likewise the preferential export shopping credit procedure, the current credit type allowance procedure needs provision of the Governmental guarantee and insurance at the Chinese company for export credits insurances.
 
 
4.      Export credit of the Export-import bank of the Public’s Republic of China for sellers.
This credit type is allowed for manufacturing and exporting machine building, electro technical and hi-tech goods and services.
Loan-debtor of this type of credit is Chinese exporter. All the terms and conditions are likewise the export credit for consumers.
Credit is allowed in Chinese Yuan.
 
 
5.      Import credit of the Export-import bank of the Public’s Republic of China.
Import crediting is a new type of crediting for the Export-import bank of China. This credit type is allowed to Chinese companies for purchasing equipment abroad.
 
Detailed information in English on terms and conditions of allowance of preferential credits of the Government of the Public’s Republic of China, export credit for consumers and sellers of the Export-import bank of China is available at the Eximbank of China website – www.eximbank.gov.ch. Data on preferential export shopping credit and import credit of the Eximbank of China is not available at this website at the moment.
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Ministry of Foreign Affairs of the Republic of Belarus