LC World is Watching China

Concern levels regarding the ongoing economic turmoil affecting China range from major to mild among letter of credit specialists. At both ends of this spectrum however, bankers are keeping a watchful eye on the situation. 

Letter of Credits in China

In a recent poll to DCW readers,  the following questions were asked regarding the Chinese volatility: has economic turmoil affecting China already begun hampering LC-backed trade? Are there signs of apprehension and growing concern for the future? Below are two of the varied responses.

“LCs have been impacted and exporters are cautious with Chinese buyers and banks”, Krishnakumar Duraiswamy, Head of Trade Finance at Abu Dhabi Commercial Bank, said in a recent e-mail exchange with DCW. “Exporters are selective on banks they would accept and also confirmations of Chinese LCs are increasing.”

Duraiswamy contends that this is likely to continue as clients will be cautious to changes in China and analysts are expecting Chinese banks’ balance sheets to deteriorate. 

On the other side of the spectrum, one UK-based banker said his bank has not seen any appreciable change to customers’ requests to issue import credits in favour of Chinese beneficiaries with the UK economy continuing to perform comparatively well. “Where we have noticed a change is in the gradual reduction in export credits we are asked to advise, particularly for raw materials e.g. copper and iron ore. This trend has been apparent for the last 12 months. There has been no significant change in volumes for either exports or imports in (August) and based on what we are seeing do not expect to see one.”

Has the turmoil in the Chinese economy had an impact on your work? Let us know in the comments. 


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