China's photovoltaic (PV) companies are facing growing risks related to overseas accounts receivable, with some situations worsening. According to reports from the Morning Post, several leading PV firms have taken measures to mitigate these financial risks by utilizing short-term export credit insurance from China Export Credit Insurance Corporation (CITIC Insurance).
Chaori Sun, for instance, has secured short-term export credit insurance through CITIC Insurance and is engaging in short-term trade with international buyers. Meanwhile, JA Solar, a major Shanghai-based PV company, recently received a payment of $4,509,900 from CITIC Insurance due to delayed payments from overseas clients. This was the largest single compensation paid to the company under its export credit insurance policy.
Looking ahead, JA Solar expects another $5 million in compensation from CITIC Insurance for a separate export transaction involving goods shipped between August and October 2011. If all claims are approved, the total compensation could reach $10 million, highlighting the increasing reliance on insurance to manage overseas buyer risks.
The Chinese PV industry has grown rapidly, creating a comprehensive manufacturing system. However, overcapacity and heavy reliance on foreign markets have left many companies vulnerable. With slow economic recovery in Europe and the U.S., along with trade barriers like the "double anti-dumping" policies, the sector faces mounting challenges. CITIC Insurance officials note that systemic risks in the capital chains of overseas buyers are rising, especially in European markets.
Established in 2001 with a registered capital of 27.16 billion yuan, CITIC Insurance is a state-owned policy insurer tasked with supporting China’s foreign trade. Its services include export credit insurance, investment guarantees, and risk management solutions. Since 2009, the Shanghai branch has been actively involved in the PV sector, offering credit guarantees to large-scale manufacturers.
In 2011, JA Solar insured a €6 million shipment to Germany’s Sinosol under a 90-day credit term. When Sinosol failed to pay due to cash flow issues, CITIC Insurance stepped in and paid $4.859 million to JA Solar. The company reported that this compensation significantly improved its cash flow in late 2012.
CITIC Insurance offers coverage for various risks, including political instability, buyer bankruptcy, and product rejections. In 2012, the Shanghai branch compensated $7.554 million to local PV companies and recovered $10.288 million in overseas receivables.
Industry experts advise companies to conduct thorough credit checks and use insurance mechanisms to reduce exposure. CITIC Insurance also encourages PV firms to shift towards domestic and overseas power plant investments, which can help avoid trade barriers and create jobs abroad.
To address long-term investment risks, CITIC Insurance now offers 20-year coverage for overseas PV projects, covering political, collection, and exchange rate risks. This insurance can cover up to 90% of potential losses, making it an essential tool for companies expanding internationally.
According to CITIC Bank’s 2012 “National Risk Analysis Report,†the risk levels in 17 countries have increased, with many experiencing downgrades. In North America, insured amounts rose by 28.1%, while Europe saw a 11.1% increase. However, the European debt crisis has led to slower order growth and higher claims, particularly in core economies.
As the global economy remains volatile, Chinese PV companies continue to rely heavily on insurance to navigate uncertain markets and protect their financial health.
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