WORLD TRADE  
ORGANIZATION  WT/WGTDF/W/41 
26 November 2008 
 (08-5805) 
Working Group on Trade, Debt and Finance Original:   English 
 
 
 
COMMUNICATION FROM HONG KONG, CHINA 
 
 
 The following communication, dated 25 November 2008, is being circulated at the request of 
the Delegation  of Hong Kong, China. 
 
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1. As a consequence of the recent global financia l crisis, the market for trade finance has 
tightened abruptly, particularly for developing eco nomies.  This is having a serious impact on the 
exports of such economies, since trade finan ce is the lifeblood for international trade.  
 2. In response to the situation, Hong Kong, China has taken some urgent measures to enhance its 
assistance to small and medium enterprises (SMEs), whic h are most hard hit by the financial crisis, to 
help them secure loans from the financial market.  More details are set out in the paragraphs below. 
 
I. ENHANCED SERVICES OF THE HONG KONG EXPORT CREDIT INSURANCE 
CORPORATION 
3. The Hong Kong Export Credit Insurance Corporation (ECIC), wholly owned by the 
Government of Hong Kong, China, was set up to encourage and support export trade by providing 
exporters with insurance protection against non-pa yment risks arising from commercial and political 
events.  To assist SMEs in their efforts in ma intaining their business and developing new markets in 
face of the current financial crisis, a package of measures has been launched by ECIC.  Details are set out below. 
1. Higher cover for exports  
 To offer better protection for exporters and to assist them in acquiring funding from the banks 
during the current credit crisis, ECIC will be as accommodating and flexible as possible to SMEs' 
requests for export credit insurance and will increase the cover, within the bounds of prudent credit 
assessment and risk management. ECIC will in troduce a mechanism under which deductibles for 
claims and lower-than-usual indemnity ratios for th e insurable exports (the usual indemnity ratio 
being 90 per cent) will apply, if necessary, for sharing out the risks. 
 
2. Higher cover for emerging markets 
 To assist exporters to develop emerging ma rkets, ECIC has reviewed and upgraded the 
market ratings of a number of emerging markets to  allow ECIC to provide more cover with higher 
credit limits for exports to the markets concerned.   The premium rates for the upgraded markets will 
also be lowered. 
 WT/WGTDF/W/41 
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  3. Expediting and facilitating the processin g of small credit limit applications 
 ECIC will expedite the processing of applicati ons for small credit limits of HK$0.5 million or 
below to 2-3 days upon the receipt of adequate information (normal processing time is currently 4 
days and was 5 days before 1 October). 
 
4. Increase in Statutory Maximum Liability 
 ECIC's aggregate maximum liability arising from its insurance business currently amounts to 
HK$13.52 billion.  To strengthen ECIC's underw riting capacity, the Statutory Maximum Liability1 
will be increased from HK$15 billion to HK$30 billion.  
 
4. Moreover, ECIC will: 
(a) Continue to provide cover for the payment risks arising from buyers' failure to take 
delivery of goods which are generally not insurable in the market;  
(b) Not increase the premiums for its insurance facilities;  
(c) Offer each exporter a certain number of free buyer credit assessment services;  and  
(d) Organize more seminars/forums to share with the industry experiences in risk 
management, enhance their knowledge on the latest developments in overseas 
markets and better understand the needs of exporters.   
II. ENHANCED SME LOAN  GUARANTEE SCHEME2 
5. The SME Loan Guarantee Scheme aims to help  SMEs secure loans from the financial market, 
with the Government acting as guarantor for up to 50 per cent of the approved loans.  The maximum 
amount of loan guarantee for each SME is HK$6 million.   To provide greater support to SMEs in the 
midst of the global financial crisis and to provide them with more flexibility, the maximum guarantee 
period has been extended and SMEs are allowed to recycle the guarantee. 
III. BANKING INSTITUTIONS' LOANS TO SMES 
6. To encourage banking institutions to a dopt a supportive attitude towards their SME 
customers, the Hong Kong Monetary Authority (HKMA) has recently issued a circular to such 
institutions, urging them to be as accommodating and flexible as possible to  the funding needs of 
SMEs, within the bounds of prudent risk management .  In this regard, the banking institutions are 
advised to, among other things, refrain from hasty a nd indiscriminate (i) withdrawal or reduction of 
lines of credit, (ii) shortening of trust receipt pe riods, or (iii) extension of the period for making 
payments to retail outlets/merchants in respect of  credit card transactions.  Any actions which have 
the effect of tightening credit to SME customers should as far as practicable be considered on a 
selective and case-by-case basis in the light of the gi ven customer's credit position rather than applied 
across the board to SMEs within the same industry or sector.   
 
7. HKMA has also advised the banking institutions  that, if any tightening in the provision of 
credit to existing SME customers is considered n ecessary, the banking institutions should be prepared 
                                                      
1 The SML is the maximum amount for which the ECIC can be contractually liable to indemnify its 
policy holders if all risks materialize at the same time. 
2 SMEs are any manufacturing businesses which employ fewer than 100 employees in Hong Kong, 
China or any non-manufacturing businesses which employ fewer than 50 employees in Hong Kong, China both 
regardless of industries.  WT/WGTDF/W/41 
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  to explain to the customers the rationale behind th e changes and work with the customers to identify 
whether there are other ways (e.g., more collateral) in which the banking institutions' credit or other 
concerns might be addressed.  Wherever possible,  changes should be introduced in a gradual manner 
to lessen the immediate impact.  Where SME cust omers experience financial stress and run into 
difficulties as a result of the global financial cris is, the banking institutions should remain supportive 
and adopt a sympathetic attitude towards request s for temporary relief a rrangements, such as 
extensions of repayment deadlines. 
 
IV. CONCLUDING REMARKS 
8. The global financial crisis and the consequen tial tightening of trade financing for SMEs, are 
serious threats to international trade.  Through th is submission, Hong Kong, China would like to share 
with other WTO Members its experience in assisting SMEs  in the midst of the current financial crisis.  
HKC also take this opportunity to urge all WTO Members to exercise flexib ility and make decisive 
moves in the agricultural and non-agricultural ma rket access negotiations, so that the negotiating 
modalities can be agreed within 2008 to pave the way for successful conclusion of the Doha 
Development Agenda negotiations in 20 09 to enhance global economic stability.  
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