The most important aspect of international trade is the credibility of the buyer and seller. Traditionally, we ensure the integrity of both parties through face-to-face communication, site visits, and the elaboration of business conditions. However, with the development of technology, both exporters and importers have more and more ways to hide their true backgrounds and fraudulently obtain payment or goods. This is why third-party credit insurance companies, based on confirming the credibility of both buyers and sellers and protecting the interests of both, have been born.

1. Basic Introduction to Sinosure

Credit insurance companies exist in various countries around the world. Any party to a transaction can appoint a third party credit insurance company to conduct a credit check on another party to the transaction or to ensure the transaction. However, these are generally private, for-profit third party companies.

China, a major trading country, has a more authoritative credit insurance company, China Export and Credit Insurance Corporation (Sinosure), which is a central financial enterprise, one of the four policy financial institutions in China, and the only policy insurance company in China that undertakes export credit insurance business, and is directly under the central administration at the vice-ministerial level. It was officially inaugurated on 18 December 2001 and has formed a nationwide service network, with a representative office in London, UK, and working groups in Russia, Brazil, South Africa and Dubai.

Unlike other third-party credit insurance companies, Sinosure is the only neutral, non-profit organization that protects both importers and exporters in international trade.

2. Benefits of Sinosure for importers

Sinosure covers both country risk and buyer's risk. Country risks include buyer country collection controls, government expropriation, nationalization and war. Buyer's risk includes the buyer's credit risk (default, refusal to pay and bankruptcy) and the buyer's bank risk (issuing or confirming bank risk).

Sinosure may seem to protect the interests of the Chinese seller, but in fact, the existence of Sinosure is also beneficial to the international buyer.

A. Greater trust between buyer and seller

As Sinosure expands its business and becomes more aware of trade risks, more and more Chinese exporters are choosing Sinosure for their foreign trade transactions, even in the early stages of negotiation, exporters will conduct credit investigations on foreign buyers through Sinosure. If you, as the foreign buyer, have good credit after the investigation, or if you are already insured by other export sellers and your creditworthiness remains good under the Sinosure file, then the exporter's trust in you is higher during this negotiation and the desire to close the order is also on the rise. For your buyers, exporters who are insured by Sinosure must also be honest in their business.

B. More right in price

As we have said, if you, as a foreign buyer, are already credit checked or insured by other export sellers and have maintained a good credit record in your trade transactions registered with Sinosure, then the exporter will feel that you are a more promising buyer and will be more interested in facilitating the order. This will give you more leverage in the negotiation of the order based on your good credit standing. This is of course also an advantageous right to press the exporter for a price.

C. Payment methods are negotiable

In addition, we mentioned that if you already have a good credit record on file with Sinosure, you will have more options in terms of payment methods, in addition to having an advantage in price negotiations. This is because promptness of payment is an important part of Sinosure's assessment of a buyer's creditworthiness. If you have no payment problems with other exporters, such as delinquency or refusal to pay, then the seller will be more likely to allow a longer payment period for you in the negotiation of this order. Longer payment terms are, of course, better for your liquidity.

D. Intervene in negotiations between the parties after a dispute has arisen and listened to their reasons

Although Sinosure is the only policy insurance company in China that undertakes export credit insurance business, it actually protects the rights of both the importing and exporting parties. Even if a dispute eventually arises, then Sinosure as an intermediary, is there to negotiate the views and requirements of both parties, rather than simply making a demand for payment to the buyer on behalf of the exporter. Based on the terms of the contract, Sinosure will negotiate with the exporter on behalf of the buyer if the exporter is in breach of the terms of the contract in terms of the delivery date, product quality, payment method, etc.

3. The impact of Sinosure's credit rating on importers' imports from China and how to maintain the credit rating

A. Credit check before cooperation, which affects the approval limit and thus the exporter's trust in the importer

The existence of Sinosure gives exporters a certain level of assurance about the creditworthiness of foreign buyers and the risks involved in the transaction. Credit checks prior to cooperation can affect the exporter's trust in the buyer, which in turn can affect pricing and other contract terms. Even if the order is contracted, if the buyer's credit rating is not high, then this will affect the amount of insurance coverage that Sinosure can provide to the buyer. The reduced amount means that the exporter will prefer smaller batches and shorter collection times, as well as longer intervals before batches are shipped. This is because, for exporters, the insured amount can only be reused once the previous batch of goods is received, otherwise even if the goods are shipped and the goods do not have the corresponding insured amount, Sinosure will not be able to pay out in case of a dispute.

B. Credit rating damage, (blacklisted if serious) nationwide exporters immediately know, stop shipping

This means that if a foreign buyer refuses to pay or defers payment in one of the transactions if Sinosure receives a report from the exporter of that transaction, the system of Sinosure will notify all of the buyer's suppliers in China to stop the shipment, otherwise, Sinosure will not provide risk coverage for goods that are shipped with knowledge of the risk. If the foreign buyer's delay in payment or fraudulent behavior is proven serious, Sinosure will blacklist the buyer and if a Chinese exporter requests a credit check on the buyer, Sinosure will present a blacklist alert and will not provide coverage for the transaction.

So even though Sinosure is the policy insurance company that undertakes export credit insurance business in China, to a certain extent it governs the rights and interests of both exporters and importers. So as a foreign buyer, if you can't give up on importing products from China, you must not ignore your own credit rating with Sinosure, pay on time, take delivery of goods according to the contract and make reasonable claims.