The Export-Import Bank of the United States has urged US lawmakers to loosen underwriting rules for its flagship China programme, with fresh data showing the agency is still struggling to compete with Beijing’s export credit volumes.

In a US Congress committee hearing in late June, Reta Jo Lewis, the bank’s chair, said the export credit agency’s China and Transformational Exports Programme (CTEP) is slowly gaining traction in the market.

Over a quarter – or US$2.4bn – of the deals US Exim authorised in 2023 were under its China mandate, a notable jump from US$253mn the year prior, Lewis told the House subcommittee.

US Exim launched the China and Transformational Exports Programme (CTEP) four years ago to counter Beijing’s export credit system, which Washington says provides extended repayment terms and low interest rates to give Chinese exporters an unfair advantage over their competitors.

In total, the US export credit agency (ECA) has now authorised CTEP loans, guarantees and insurance worth US$3.6bn.

But despite these figures, there are ongoing concerns over the scheme’s progress. US Exim’s latest competitiveness report, published July 1, ranked the North American agency as the seventh largest provider of export credits last year, far behind China, which came second.

During the subcommittee meeting on June 27, legislators widely queried CTEP’s muted volumes.

“Although it seems this program is having some impact, there is much more that it could do,” said Blaine Luetkemeyer, a Republican congressman and chair of the US House Subcommittee on National security, Illicit finance and international financial institutions, at the hearing.

US Congressman Andy Barr, a Republican house representative in the state of Kentucky, said the China programme has “a lot of room to grow” for US Exim to reach its US$27bn target.

During the hearing, legislators cited US Exim’s 2% default rate cap as a key barrier, stopping the agency’s underwriters from approving transactions in riskier markets.

US Exim’s default rate currently stands at 1.112%, yet were the ECA to exceed the cap, it would have to immediately halt activities.

Congressman Barr, who years ago introduced a bill that would raise the cap to 5%, said he wants to “supercharge” the scheme.

“While it’s still essential that the bank makes sound business decisions… allowing the bank to make larger, more aggressive deals, is a key tool in countering China,” he said.

US Exim’s Lewis echoed such views and, on multiple occasions, urged legislative reform that would exempt China-related deals from the 2% cap.

“Deals are coming in, our pipeline is strong,” Lewis told the committee. “[But] it is fair to say, we want to do more, and we can do more.”

“Suffice to say, the default rate poses a significant challenge to Exim’s ability to support US exporters. China’s Exim and the PRC [Peoples’ Republic of China] and other export lenders are not bound by these constraints.”

Lewis also called on lawmakers to reauthorise US Exim’s charter well ahead of the late-2026 deadline.

“One of the things that we would be remiss in not talking about is the fact that an early reauthorisation with enhancements to the CTEP mandate, backed by a large bipartisan majority, would send a strong signal to the world that Congress is committed to supporting Exim,” Lewis said.

US Exim still bears the scars of an effective shutdown between 2015 and 2019, when Congress left the agency without a board quorum and unable to authorise transactions over US$10mn. During that time, it lost market share and missed out on tens of billions of dollars in deal opportunities.

 

Wider issues?

Beyond US Exim’s China programme, there are concerns a lack of policy and product flexibility means the ECA is struggling to compete with rivals in Europe and Asia.

In the latest edition of its annual competitiveness report, published July 1, US Exim revealed its medium and long-term (MLT) export credit volumes grew to US$4.7bn last year – up 67% from 2022.

US Exim found it was the seventh largest provider of MLT export credits, with Italy’s Sace ranking top (US$15.6bn), followed by China’s ECAs (US$15.3bn) and in third spot Germany’s Euler Hermes (US$12.5bn). Korea, France and the UK’s agencies also placed higher than US Exim.

Such figures show promise for US Exim, which ranked 13th in last year’s competitiveness report.

Yet an annual survey of US Exim’s export clients, banks and other industry practitioners – included within the competitiveness report – highlights ongoing concerns over the agency’s offering.

About 60% of US Exim’s customers viewed the agency as “far” or “slightly” less competitive than rival ECAs, once again citing its 85% domestic content requirement as a key negative trait. Fellow OECD agencies, such as UK Export Finance, have a much lower domestic content threshold of 20%.

The slow pace of US Exim’s deal underwriting processes was flagged as another problem area.

“Exporters stated that other ECAs will issue a LI [letter of intent] within 48 hours and process transactions within six months from application to close, while Exim will take up to six to eight weeks for a LI and deals will not be closed months after board approval,” the report reads.

Exporters also took aim at US Exim’s deal appetite, noting it is “not encouraging deals because of a conservative underwriting culture and concern about hitting the two percent default cap”.

In a statement to GTR, US Exim’s Lewis says the competitiveness report helps the agency identify areas where the agency is less competitive than other ECAs, which is the “first step in potentially addressing these discrepancies”.

“During my recent testimony before Congress, I underscored that Exim is seeking many changes to its charter that would help address some of the competitive issues that we report as identified by exporters and lenders, including changes to the default rate cap as part our budget 2025 request.

“These actions would help accomplish the same goal, which is to allow Exim to compete more aggressively against our foreign competitors — including the PRC — and embrace higher risk technologies and markets, ensuring US exporters can compete in the global market.”