Doing business in China with Export Development Canada

EDC's track record

Export Development Canada (EDC) is a unique financial institution that has been helping Canadian businesses grow and prosper through exports and international investment since 1944. EDC's sophisticated trade finance solutions can help exporters compete in more than 200markets, including higher-risk and emerging markets. EDC is a Crown corporation that operates on commercial principles.

EDC is governed by a board of directors composed of representatives from both the private and public sectors, and reports to the Canadian Parliament through the Minister of Small Business, Export Promotion and International Trade.

EDC delivers its products and services through sector-based business teams plus a cross-sector team dedicated to serving smaller exporters. These business teams are supported by a network of experts who provide in-depth market and product knowledge, research, analysis and skills.

Support for sales and investment in China

EDC has considerable experience in supporting Canadian exporters and investors in the China market. The Corporation's involvement in China extends back to 1979. Since then, EDC has helped countless number of Canadian companies export to China and grow their business. Today, as China continues to offer opportunities across multiple sectors, an array of EDC insurance, financing, guarantee and bonding programs is available to support Canadian firms in penetrating or expanding their businesses in the market.

Export insurance services

EDC's insurance services include:

insurance for sales on short- and medium-term credit
bid/performance-related insurance and guarantees
surety bond support

EDC insurance policies protect exporters against various losses due to commercial and political risks. Examples include:

buyer insolvency
default on payments
repudiation of goods
contract termination

Sales on short-term credit

EDC's export credit insurance is available to help Canadian exporters manage the credit and political risks involved in extending short-term credit (generally up to 180 days) to their buyers. Today, EDC is supporting a wide variety of goods and services sold on short-term credit to the China market.

The credit and political risk coverage offered by EDC's export credit insurance can help protect an exporter's cash flow, assist in structuring more attractive payment terms for buyers, and increase an exporter's access to working capital.

EDC's overall experience in China has been favourable, and coverage is available to support sovereign, quasi-sovereign and private buyers. Availability of and access to good credit and financial information on buyers is critical to EDC’s ability to support short term credit sales to China. EDC is continuing to develop relationships with key credit reporting agencies in the China market to assist exporters in this area.

Sales on medium-term credit

Insurance support for contracts involving the provision of medium-term credit to Chinese buyers is also available from EDC. This support is particularly applicable for the sale of capital equipment and services, including projects such as the establishment of turnkey plants.

Historically, medium-term credit transactions that EDC has supported have involved projects supported by Chinese government-owned banks.

In addition to credit insurance covering certain credit and political risks of non-payment, EDC's Performance Security Insurance and Guarantees have been important tools for exporters.

These programs protect against certain calls on performance instruments which are established in favour of Chinese buyers. The protection can be instrumental in allowing exporters to free up their working capital lines with their banks. Under the Performance Security Guarantee program, a full guarantee is offered to the exporter's bank against any call on the bid/performance bond.

Export financing services

EDC's financing services include:

lines of credit with foreign banks or agencies worldwide
note purchase arrangements
direct buyer loans
project risk financing packages

EDC's financing services enable Canadian exporters to provide their customers with flexible medium- or long-term financing. Support is provided for the sale of capital equipment and services, with repayment terms generally extending up to 5 years, depending on the nature of the product or service. Under EDC financing arrangements, EDC disburses funds directly to the Canadian exporter. All transactions financed must meet EDC's normal criteria relating to Canadian benefits, the exporter's technical and financial capability and the credit worthiness of the borrower/country.

The provision of competitive and flexible medium- to long-term financing by EDC to Chinese buyers can help Canadian exporters in winning capital equipment and services contracts.

How to access EDC's credit facilities

The exporter should contact EDC in the early stages of the commercial discussions with the buyer, and provide EDC with:

a description of the proposed transaction
a Canadian Benefits Report and other relevant technical and financial information on the exporter's business
a draft copy of the commercial contract (when available)

EDC will require other financial and non-financial information from the Chinese buyers in order to process the application and, if it's approved, respond with a formal offer of financing to the buyers in China.

Once the financing offer has been accepted and all documentation has been submitted to EDC, EDC will pay the exporter directly on behalf of the borrower, according to the terms of the commercial contract.

Support for new risk transactions in China

As the Chinese market continues to evolve, EDC is familiarizing itself with issues related to transactions involving new risk structures, as well as the dynamic new Chinese entities involved.

As the process of commercialization continues, EDC will consider providing support for new risk transactions on a case-by-case basis, taking into account risk mitigating factors such as:

borrowers with U.S. dollar or hard-currency earnings
exporters having previous favourable experience with their buyers
involvement of foreign investors familiar to EDC in the project
involvement of a highly regarded local bank in the project
opportunity to risk share with highly regarded financial institutions
strong degree of government support/approval for the project
participants or sponsors being listed on a reputable stock exchange
security previously having been successfully enforced in the market

Each new risk transaction will, of course, be considered on its own merits, and early contact with EDC on potential transactions is highly recommended, given the challenges involved.
For more information about EDC support for doing business in China, call 1-888-332-3320 to contact an EDC office near you.
Email: tradeadvisor-conseiller@edc.ca
Website: www.edc.ca

You may also contact the EDC's representative office in China

Chia Wan Liew, EDC Chief Representative
Tel.: (852) 9177-6219
Email: cliew@edc.ca

Report a problem or mistake on this page

Date Modified:: 2023-11-09

Search