How does China affect Australian exports?
With the global economy in turmoil, a new report by Coface examines what’s happening in China and how that might affect Australian exporters.
Chinese exporters are changing production models to improve productivity and the quality of products produced to help secure export markets in the shifting global economic environment.
The Chinese government aims to restructure the economy through incorporating new technology into business models, and developing domestic consumption, according to The 2012 Coface Corporate Credit Risk Study for China.
The study, released by credit insurance company Coface, outlined certain sectors of China’s economy are at high risk due to the downstream effect of the Eurozone crisis.
The study divided 48 export sectors into categories based on risk factors and revealed construction materials and construction, metals and manufacture of fabricated metal products, furniture, textiles, clothing and leather, paper and printing at the highest risk.
Despite these risk factors the survey revealed that companies are optimistic about China’s economy with over 80 percent of those interviewed believing that China will not be going into a recession in 2012.
The study offered the following credit risk advice for exporters:
- Knowledge of downstream sectors- Make sure you know all distribution channels, and layers involved with your business.
- Monitor trading counterparts- look at credit reports and gather information from other suppliers in the industry to understand buyer’s situations
- Restrict credit terms to within 60 days- This will help minimise credit risk
- Be cautious trading with new buyers- establishing a credit record for each buyer is important. Try to make sure trades are kept within approved credit amounts. Always make sure orders in excess of credit amounts are settled through other payment means before delivery.
- Avoid trading with high risk sectors- Try to avoid credit transactions with these sectors, and watch for changing situations.
- Purchase credit risk protection tools- Tools such as credit insurance will help minimise non payment losses.
- Be informed on economic trends and government policies-Being aware of major changes can help you implement preventative measures to help minimise risk.