Chinese Debt to Israeli Exporters Stands at $700 Million

Export insurer makes estimate amid growing concern about China's economy.

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Israeli exporters are owed some $700 million by Chinese companies and may have trouble recouping all of it, according to the Israel Credit Insurance Company. The firm’s claim comes amid growing fears that the Chinese economy is slowing and may even slip into recession.

“Until now, nonpayment of debts by customers of Israeli exporters in China was rather low, because Chinese companies were growing and wanted to continue to buy quality Israeli goods,” said ICIC CEO David Milgrom. “The changing economic situation in China may create liquidity problems for companies in China, and in this situation the odds of collecting the debts are not as high as they were,” he added.

ICIC, whose business includes insuring exporters against nonpayment, took the survey amid growing concerns about the Chinese economy that have emerged in recent weeks and led to a global stock market rout last week. Dodgy credits on the balance sheets of the country’s four biggest lenders jumped by 28%, to 592 billion yuan ($92.8 billion), in the first half of the year.

About half the $700 million is owed to Israeli high-tech companies; another 18% to chemicals producers; and 13% to makers of medical devices, ICIC estimated.

Israel has enjoyed growing trade and business ties with China in the last three years, with Israeli exports to China reaching $1.2 billion in the first half of the year, while imports reached $2.9 billion, according to the Israeli Export Institute.

But ICIC said that collecting debt from Chinese companies was difficult even in normal times.

“Debt collection procedures in China are complex and more complicated than most countries,” it said, citing, among other things, the absence of any sanctions for delaying payment beyond accepted limits, or laws barring the owners of indebted businesses shutting down and starting up new ones.

ICIC’s parent company, Euler Hermes, said that on a scale of 1-100, China rates a 76 for the complexities of debt-collection procedures, among the world’s highest.

In spite of China’s mounting problems, a delegation from the Federation of Israeli Chambers of Commerce is visiting the country, led by its president, Uriel Lynn. Among other things, Lynn signed an agreement with the China Council for the Promotion of International Trade (CCPIT) to develop more trade and investment.

The agreement was reached amid expectations that Israel and China will soon be signing a free trade area agreement.