CEF sees great potential for factoring in China
(China Daily)Updated: 2007-01-16 10:54
Q: Do you see any competition with Chinese banks because they also provide factoring services to exporters?
A: We provide a very different risk management solution and also a different level of services. We provide different types of services with more focus on the trade perspective rather than the finance perspective.
We don't really see ourselves competing with banks. In fact we are very interested in working with banks to help them provide our level of service and expertise in the local market. We are interested in working with them to enhance their service offerings to their customers by allowing them to let us give our additional services and personal attention to their customers. So we consider banks more as potential partners than anything else.
Q: Which potential customers do you focus on and why target that group? What, do you feel, are the biggest concerns for SMEs conducting exports based on your contact with them?
A: We look at the SME market and think that's the key market that needs our services and support to compete internationally.
Small businesses with $20 million worth of exports to upwards of $250 million are the size we feel have the biggest advantage to work with us.
The biggest concern for SMEs is risk. Chinese exporters need the ability to ensure their buyers will follow through with their commitments, and because through local solutions they don't have as much direct access to buyers they feel a high level of risk. Actually the Chinese default rate in terms of payment to their direct exporters is about 5 percent, whereas internationally the rate is only 0.25 to 0.5 percent 10 to 20 times smaller than in China. Solutions like ours will help them resolve those problems ahead of time. Exporters' risks are mitigated significantly.
Q: Chinese SMEs are trying to expand into the world market, but the prices of their products are being pressed down by their buyers, international retailers such as Wal-Mart, Costco and Tesco. How can you help small Chinese businesses reach their end customers directly and how large is the margin created by contacting the end clients directly rather than going through a distributor?
A: Since Chinese exporters are able to compete less and less on price, service and quality and payment terms are the three key areas they need to focus on.
With our help end customers who never had the ability to directly source products from China's SMEs can now go directly to them.
We don't find the buyers for the exporters, but through the buyers we provide
a service to the exporters. From a buyer's perspective we at this time mainly
concentrate on the North American and European markets. In time we may expand
our services across other markets.
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