EDC: Facilitating Trade and Investment in Hong Kong and Mainland China HKBCA National CanadaHong Kon

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EDC Facilitating Trade and Investment in Hong
Kong and Mainland ChinaHKBCA National
Canada-Hong Kong Business ForumApril 23,
2007Toronto, ON
Marvin Hough Regional Vice-President
Asia www.edc.ca
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EDC Facilitating Cdn Trade

• Export Development Canada (EDC) is Canadas
  official export credit agency.
• Founded in 1944, EDC is a Crown corporation that
  operates as a commercial financial institution.
• Mandate
• To support and develop, directly or indirectly,
  Canadas export trade and Canadian capacity to
  engage in that trade as well as to respond to
  international business opportunities.

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How We Do It ? EDCs Solutions for the Chinese
Market

• Accounts Receivable Insurance
• Protection against the non-payment by Chinese
  buyers due to commercial or political reasons
• Bonding Services
• Wide variety of instruments to support bid bonds,
  performance bonds and warranty bonds
• Financing
• Based on corporate risk, sovereign risk and
  project risk
• Pre-export financing for exporters
• Canadian Direct Investment Abroad (CDIA) Support
• Political Risk Insurance (PRI) coverage against
  expropriation, inconvertibility and civil
  disturbance
• Enhanced support across EDCs programs to help
  Canadian firms make investments, capitalize /
  fund affiliates and finance purchases from
  Canadian affiliates.

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2006 EDC Achievements

• Supported more than 66.0 bln in exports and
  international investments in more than 185
  markets around the world
• Achieved 15.2 bln in 148 developing markets
• Served more than to 6800 Canadian (Cdn) exporters
• In 2006, EDC supported 13 of total Cdn exports
  in goods, services and investment
• EDC 2006 Success in Hong Kong and China
• Hong Kong - supported .562 bln through 147 Cdn
  exporters
• China - supported 1.3 bln through 245 Cdn
  exporters

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EDCs Role in the Export Process
Accounts Receivable Insurance (for
Exporter) (for Affiliate) Sinosure
EDC Buyer Financing Contract Insurance Northsta
r
Export Guarantee Program Advanced Payment
Performance Bonding Contract Insurance
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Value Added Support from Hong Kong for Your
Business in Mainland China

• Leader in providing value-added financial and
  management services
• Source of equity funds for Chinese projects
• Own or control 63,000 factories employing 12
  million in China
• 56,000 trading firms dealing with import to and
  export from China employing 477,000 in Hong Kong
• International settlements

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EDC Level of Support Hong Kong
EDC has various mechanisms in place to support
Canadian exporters and investors, primarily
Accounts Receivable Insurance (473 million in
2006) and Financing (106 million in 2006).
Historical EDC Volumes in Hong Kong

• Key sectors of support (by of companies)
  include
• Advanced Technology
• Consumer Goods
• Machinery Equipment
• Base Semi Manufacturing
• Key sectors of support (by total volume) include
• Advanced Technology
• Forestry
• Financial Institutions
• Consumer Goods

CAD Million
Claims Experience 2000-2006 18 claims paid CDN
1.8 million
147 Canadian Exporters and Investors supported in
2006
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Mainland China - Assessing and Managing Your
Credit Risks

• A surge in foreign companies looking for business
  in a post-WTO China has created a buyers market.
  Chinese buyers are becoming extremely demanding
  about payment terms. Open account is quickly
  becoming the norm rather than the exception.
• WTO is creating new winners and losers, in some
  cases weakening the credit standing of
  established Chinese companies who are struggling
  to maintain market position in the face of new
  foreign and domestic competitors.

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EDC - A Long History in China

• EDC has been active in China since 1979, making
  it the first ECA to establish business ties in
  China.
• In the last five years alone, EDC supported over
  Cdn 6.4 bln worth of exports to Chinese buyers
  through our various financing and insurance
  programs.
• China is a key strategic country in our business
  development plans.
• Underlining our commitment to China, EDC
  established its very first overseas
  representation in Beijing in 1997 and moved its
  Chief Representative to Shanghai in August 2006.

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EDC Level of Support - China
EDC has various mechanisms in place to support
Canadian exporters and investors, primarily
Accounts Receivable Insurance (1.1 billion in
2006) and Contract Insurance Bonding (110
million in 2006).
Historical EDC Volumes in China

• Key sectors of support (by of companies)
  include
• Advanced Technology
• Machinery Equipment
• Forestry
• Base Semi Manufactured Goods
• Key sectors of support (by total volume) include
• Advanced Technology
• Base Semi Manufactured goods
• Forestry
• Mining, Infrastructures Development Services

CAD Million
Claims Experience 2000-2006 28 claims paid CDN 8
million
245 Canadian Exporters and Investors supported in
2006
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Mainland China Breakdown of the 245 Canadian
Companies Supported in 2006
Breakdown by Sector
Size of the Companies supported Small 47 Cos
(19) Med 103 Cos (42) Large 95 Cos (39)

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Recent Financings Through Hong Kong
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Import Export Contribution by Type of
Enterprise in China
Role of Foreign Affiliates in Chinas Import and
Export Activities

• Foreign Affiliates have accounted for
  approximately 60 of all imports to, and exports
  from, China.
• Although smaller in terms of percentage of
  contribution, Chinese Private Enterprise activity
  in both exporting and importing is rising.
• State Owned Enterprise contribution slowly
  decreasing
• EDC is increasingly focused on facilitating
  business with foreign affiliates and Chinese
  private enterprises.

WOFE Wholly Owned Foreign Enterprise
Source Ministry of Commerce of the Peoples
Republic of China
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EDC Strategies in the HK/Mainland China Market

• On-the-ground representation
• Multi-faceted financial partnerships
• CDIA support
• Sinosure

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On-the-Ground Representation

• EDC has a local presence in China since the
  1990s and has maintained and developed its
  relationships through our Chief Representative,
  Winston Kan (Shanghai) and our Associate, Wang
  Hui (Beijing).
• Promote the partnership approach with fellow
  Canadian government colleagues and the
  Chinese-Canadian community.
• Position EDC as a strategic partner with key
  Chinese and international companies.

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On-the-Ground Representation (contd)

• Develop local solutions for Canadian firms with a
  presence in China.
• Develop partnerships with other financial
  institutions to share risks and broaden market
  coverage.

Broaden the base of Canadian companies active in
China
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Multi-Faceted Financial Partnerships

• Chinese Banks
• Bank of China, China Construction Bank, Bank of
  Communications, Industrial and Commercial Bank of
  China

Syndications
Financing

• International Banks
• Standard Chartered, Calyon Bank, Citibank, HSBC

• Multilateral/Bilateral Banks
• World Bank, ADB, IFC, UNCTAD

Bonding
Guarantees

• Canadian Banks
• Scotiabank, CIBC, RBC, TD, BMO

Market Intelligence
Sinosure Credit insurance
Structured Finance
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EDC CDIA Support

• There are typically 3 types of CDIA support
• that EDC can provide
• To the Canadian exporter/investor for the purpose
  of making an investment
• To the foreign affiliate to help capitalize/fund
  the affiliate and
• To the foreign affiliates buyer to finance
  purchases from the affiliate.
• Support at each level is determined by factors
  which
• ensure we are within our legal mandate and the
• support generates sufficient Canadian benefits.

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The EDC/Sinosure Connection

• Sinosure is Chinas Government export credit
  insurance company.
• On November 7, 2005, Sinosure and EDC signed a
  formal agreement in Beijing to cooperate and
  coordinate efforts in support of customers
  pursuing business opportunities globally.

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The EDC/Sinosure Connection (contd)

• The EDC-Sinosure Agreement serves as a framework
  to enter into risk-sharing arrangements on future
  transactions.
• Through the agreement, Canadian affiliates in
  China are able to obtain accounts receivables
  insurance and other support through Sinosure
  (potentially re-insured by EDC).

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EDCs Market Representation in China
How we can mitigate risks and facilitate
transactions for you

• Develop key relationships with targeted
  creditworthy buyers.
• Brief exporters on the ground regarding perceived
  risks and how to mitigate them.
• On the ground, market intelligence relating to
  sectors, projects, and buyers.

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EDCs Market Representation in China (contd)

• Provide advice regarding appropriate credit
  terms.
• Meet with key buyers and government agencies to
  resolve issues.
• Assist EDC sector teams in closing of
  transactions.
• Provide key intermediary contacts.

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Contact Information
Key Contacts

• In China
• Winston Kan
• Chief Regional Representative
• Shanghai
• Tel (011) (86-21) 6279-8432
• wkan_at_edc.ca
• Wang Hui
• Associate
• Beijing
• Tel (011) (86-10) 6532-3536 ext. 3357
• hwang_at_edc.ca

In Ottawa Marvin Hough EDC Regional VP
Asia Tel [phone] mhough_at_edc.ca Mark
Bolger Senior Advisor - Asia Tel [phone]
mbolger_at_edc.ca