The Israeli Credit Insurance Company Ltd. (ICIC) (TASE:BSSC) has published worrying figures, in view of the financial crisis in China: Chinese companies owe Israeli exporters a total of $700 million, and half of that debt is to Israeli high-tech companies. ICIC today warned that a downturn in the Chinese economy will make it difficult to collect this debt, especially in view of the complicated proceedings involved with the debtor companies.
A study by global credit insurance company Euler Hermes, which owns ICIC, gave China a 76 rating on a scale of 1 to 100 for difficulty in collecting debt. China's rating on this index indicates that it is one of the most difficult places in the world for collecting debt from companies operating in its territory. For the sake of comparison, ICIC cites Sweden and Germany, which were rated 31, indicating a low level of difficulty in collecting debt. The same index put Israel on 53rd place with medium collection difficulty. According to the index, the most difficult place to collect debt is Saudi Arabia, which received a dubious rating of 89.
ICIC CEO David Milgrom said, "Up until now, the volume of unpaid debts by customers of exporters in China was low, because Chinese companies were on a growth trend, and wished to continue buying Israeli products, which are considered high-quality. A change in the situation in China is liable to create liquidity problems for the local companies, thereby affecting the likelihood of collecting debt from them, which will not be as high as in the past."
ICIC added that the difficulty of collecting debt from Chinese companies was due, among other things, to an absence of sanctions for the extension of actual credit days by companies. In addition, Chinese law does not limit debtor companies in starting new companies, and the proceedings in Chinese courts feature complex proceedings and lack of transparency. Since the beginning of the year, Israeli exports to China have totaled $1.5 billion, 3% less than in the corresponding period last year.
At the same time, despite the upheaval on Chinese markets, a delegation from the Federation of Israeli Chambers of Commerce is currently visiting China in an effort to expand Israel's commercial ties with the Chinese business sector. The delegation includes Federation president Uriel Lynn, Chamber of Commerce and Industry Haifa and the North president David Castel, and other businessmen. The delegation met with leaders of Chinese government organization CCPIT, whose role is to promote China's foreign trade, and signed a cooperation agreement with them for the expansion of trade and reciprocal relations in mutual investments.
Published by Globes [online], Israel business news - www.globes-online.com - on August 30, 2015
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