Israel, China sign accord to boost exports

Protocol allows for extension of total credit of up to $400 million for transactions.

By SHARON WROBEL
May 13, 2010 22:58
2 minute read.
Steinitz signs protocol with Chinese Deputy Financ

Steinitz Israel China deal 311. (photo credit: Ariel Jerozolimski)

 
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Israel and China on Thursday signed a financial protocol that will make it easier for Israeli manufacturers to export to China.

“This marks an important step to boost trade relations between Israel and China,” Finance Minister Yuval Steinitz said at the signing ceremony in Tel Aviv. “The establishment of a stable financial framework for mutual investment is an essential condition for expanding trade activities between the two countries.

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“Over the next couple of months, the Treasury, together with other government ministries, will work out a plan to strengthen economic relations between the two countries.”

The protocol signed by Steinitz and Chinese Deputy Finance Minister Li Yong is the third of its kind between the two countries. It allows for an extension of total credit of up to $400 million for transactions. The first protocol was signed in 1995 for a credit volume of $150m., which was expanded  in 2004 with a second bilateral agreement for an additional credit framework of $200m.

“The financial protocol enables Israeli exporters to get access to fast and simple credit lines to finance trade activity and close deals with businesses in China,” Finance Ministry Accountant-General Shuki Oren said.

Under the terms of the protocol, Israeli exporters will be able to take out long-term loan insurance through Ashra, the Israel Export Insurance Corp., which insures export transactions by means of interbank credit lines. The conditions set forward in the protocol allow Israeli exporters to take out loan insurance at a low premium, which gives local exporters an advantage and makes them more competitive against exporters from other countries.

The agreement comes amid an economic crisis developing in Europe that is threatening to have ramifications for Israeli exporters, since 30 percent of exports go to Europe. In addition, Israeli exporters are also suffering from the sharp depreciation of the euro against the shekel in recent weeks. That is forcing them to limit dependence and exposure to European markets and instead shift to alternative markets mainly in Asia, which are recovering strongly with fast growth.



“The crisis currently faced by many economies in Europe is accelerating the need to allocate significant resources – whether financial or managerial – to encourage activity of Israeli businesses in countries with a growing economy, and most importantly in China,” Deputy Finance Minister Yitzhak Cohen said.

At a meeting of the so-called economic roundtable on Thursday in Tel Aviv, Israel Manufacturers Association president Shraga Brosh urged the government to discuss solutions aimed at easing the plight of local exporters suffering from the crisis in the euro zone.

“When the dollar dropped against the shekel it was recommended to shift exports to markets in Europe,” he said. “Now the euro exchange rate is falling, which is likely to have a damaging effect on Israeli exports. As part of the roundtable discussions, we need to formulate tools to assist Israeli exporters and improve their competitive position.”

The economic roundtable brings together senior representatives from government, employer organizations and the Histadrut Labor Federation to discuss economic and social issues.

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