Will Create up to $38 Billion in Annual Trade Finance to Assist Global Trade
Beijing – Consistent with the direction of G-20 Leaders to improve trade finance for emerging markets, Secretary Henry M. Paulson, Jr. and Chinese Vice Premier Wang Qishan today announced a new partnership for increasing trade related finance to emerging markets. Together, the United States and China expect that their efforts will generate total trade financing for up to $38 billion in exports over the next year.
Trade finance is credit to allow exporters and importers to ship their goods and services. Companies involved with trade finance include importers, exporters, financiers, insurers and other service providers. Everyday trade in raw materials, intermediate goods and consumer goods is dependent upon the availability of trade financing. Shortages of trade finance can immediately retard economic output and employment through reductions in trade flows, and can restrict financing for capital goods necessary for world economic growth.
Current financial stresses have impaired access to trade finance to help emerging market businesses and consumers purchase imports. To support exports of products from the U.S. and China to emerging economies, both countries are making additional resources available to increase access to affordable trade finance
Secretary Paulson stated: These new sources of financing will send an important signal to emerging markets that we are committed to sustaining trade flows, the lifeblood of the global economy. China's decision to play a central role in supporting trade finance reflects its stature in the global financial system and its commitment to help reinforce growth in economies around the world. I also appreciate the leadership of Bob Zoellick at the World Bank and Luis Alberto Moreno at the Inter-American Development Bank for increasing the amount of trade finance that their respective institutions are prepared to back. As the largest shareholder of both institutions, we are supportive of their efforts.
Specifically, the United States, through the U.S. Export-Import Bank, announced its intention to provide $4 billion in new short-term trade finance facilities and $8 billion in new medium- and long-term trade finance facilities for export of U.S. goods and services to emerging markets. China, through the Export-Import Bank of China, is providing $8 billion in short-, medium-, and long-term trade finance facilities for export of Chinese goods and services to emerging markets. Short term trade financing, typically 90 to 180 days in maturity, effectively supports three or more times the value of financing in trade volume during a year. Both countries will also coordinate with the International Finance Corporation and the Regional Development Banks to complement existing emerging market liquidity efforts.
The program will be implemented through bilateral export credit agencies in the form of direct loans, guarantees or insurance to creditworthy banks. Both the U.S. Export-Import Bank and the Export-Import Bank of China will identify transactions for financing according to their respective views of the importance of the transaction and its need for financing.