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Initiation in Northeast China! Dalian Free Trade Area Forging the New Enterprise Financing Mode of Changing Export to Domestic Sales

Inorder to implement the "6-stability"and “6-guarantee” work deploymentof the CPC Central Committee and the State Council in an in-depth manner, strengthenthe support ofpolicy financing to the industrial chain ecology and the changeof export to domestic sales under the "double cycle" pattern, DalianFree Trade Area, byallying with ChinaConstruction Bank Free Trade Zone Sub-branchtomakea deep exploration to the new kinetic energy of policy financing businessdevelopment, has innovatively launched the northeastern first "domestictrade risk + trade financing" to provide financial support to enterprises inopening up the domestic market for marketable export products to ensure thesmooth operation of the industrial chain and supply chain.

Dueto reduction of orders, cancellation of projects, being difficult to commencework...China's foreign trade enterprises are facing an unprecedented test asCOVID-19 continues to spread overseas and the global trade shrinks. Under thepolicy support, many foreign trade enterprises actively "turningaround" to the domestic market are opening up domestic sales channels.However, for most foreign trade enterprises, turning around to the domesticmarket cannot be achieved overnight as it is necessary to consider cost adjustment,differences between domestic and foreign market standards and buyer defaultrisks, etc. And covering the domestic trade credit insurance of China ExportCredit Insurance Company (hereinafter referred to as "domestic tradeinsurance") has become a choice of some enterprises changing from exportto domestic sales.

Inview of this situation, China Construction Bank Free Trade Zone Sub-branch,based on the premise that enterprises have covered domestic trade insurancepolicy and will transferr the claim rights and interests thereunder to the ChinaConstruction Bank, provides financing service to enterprises after deliveringgoods or renderingservice to forge a new mode of "domestic trade insurance+ trade financing" to help enterprises open the domestic sales market,from whichsuch export industries as chemical products, electronic homeappliances, light industry, textile and costume, agricultural products, etc.have benefited.

        Whatis the effect of “domestic trade insurance + trade financing” as a new mode

       1. Promote the domestic trade development of enterprises changing from exportto domestic sales, expand the domestic trade market

Enterprises,withthe help ofthe credit reviews made by China Credit Insurance, screensquality downstreamcustomers, and at the same time, transfer through the policy risk safeguardfunction the receivable risk, relievethe after-sale worries resulting fromthe receivablemanagement, so that they have more energy to expand the market, andmeanwhile,adopt an easiertransaction modeto increase the quantities of purchase by theold buyers to better consolidate the trade relationship between enterprises andbuyers.As a result, many enterprises will have the opportunity to expand thescale of domestic sales and the domestic trade market.

       2. Broaden the financing channels for enterprises changing from export todomestic sales, relieve enterprise funds

Exportenterprises mainly rely on export credit insurance coverage and other tradefinancing channels for trade financing to obtain working capitals.When the saleschannels begin to change from export to domestic trade, the enterprise fundrequirement cannot be satisfied from the original financing channels.The newmode of "domestic trade risk + trade financing" makesthe early recoveryof enterprise domestic trade receivables possible to solve urgent needs ofenterprises anddrive the flow of enterprise funds by leverage .

       3. Facilitate financing to enterprises changing from export to domestic sales,raise the turnover efficiency

Therequirement of the rapid development of the enterprises changing from export todomestic sales for bank financing is becoming stronger and stronger. However,the status quo that vast enterprises are generally lack of mortgages andcollaterals also restricts the further cooperation with banks. The new mode of "domestictrade risk + trade financing"is able to draw near to the actualrequirements of the enterprises of trade type changing from export to domesticsales. As long as an enterprise covers the domestic trade insurance of ChinaCredit Insurance and declares such information as sales payment recovery, etc.,it can obtain bank financing conveniently and rapidly. As a result, thefinancing of the enterprises changing from export to domestic sales isfacilitated with the turnover efficiency raised.     

       4. Reduce financing cost and increase sales profits for enterprises changingfrom export to domestic sales

Inthe system of China Construction Bank and the industrial RMB loan pricing, thepricing is often at a very high level for trade enterprises with nomortgages andcollateralsto cooperate with banks forwork capital loans, with the pricing costtaking up almost all the profit space. The new mode of "domestic tradeinsurance + trade financing" can reduce the financing cost of suchenterprises by at least 30%, which truly solves the problem of difficultfinancing and high financing cost faced by enterprises changing from export todomestic sales.

Next,Dalian Free Trade Area will regard thislanded new financing mode as anopportunity to continue to deepen the cooperation with financial institutions, tapmorerequirements of industries and various links in industrial chainsto expand thecoverage of benefits achieved by enterprises and industriesunder the guide ofthe"double cycle" new development pattern, strengthen the financialsupply to enterprises changing from export to domestic sales and better servethe real economy.