As economic growth slows and uncertainty intensifies, commercial fraud and business traps are also on the rise. While foreign trade professionals are becoming more cautious in their investments, heightened anxiety may paradoxically make them more vulnerable to scams. How to effectively manage risks has become a major test of both the resilience and mindset of foreign trade enterprises striving to diversify and expand into new markets.

Behind the “Disappearing Major Client”

A recent case widely discussed in foreign trade circles highlights these risks. At this year’s Canton Fair, a buyer from Southern Europe expressed strong interest in certain products and requested a factory visit. After routine follow-ups, the buyer immediately proposed placing an order worth RMB 8 million, including a portion involving procurement on behalf of third parties.

In an effort to secure this “major client,” the Chinese supplier made concessions on payment terms. The buyer was allowed to pay a 20% deposit, with the remaining 80% covered through China Export Credit Insurance (Sinosure) to mitigate credit risk.

Initially, the process went smoothly. The buyer confirmed order details, and the factory prepared and shipped the goods to Europe. However, after receiving the goods, the buyer claimed that the company had encountered problems and then cut off all contact. Sales staff traveled to Europe to locate the buyer, but to no avail.

The factory subsequently filed a claim with Sinosure, only to discover a critical operational error: the insured company name did not match the company name used for customs declaration. Although the two entities were sister companies, their legal representatives and board members were different. As a result, the claim was highly likely to be rejected, leaving the factory to absorb losses amounting to several million yuan.

Ding Yandong, a veteran foreign trade professional, noted that amid economic slowdown and shrinking demand, even experienced traders may take risks for orders that appear attractive. “Fluctuations in mindset significantly increase risk exposure,” he said.

According to the 2025 China SME Export Risk Index (SMERI) Report, overall credit risks faced by China’s small and micro foreign trade enterprises have continued to rise over the past three years, driven mainly by a more complex global trade environment and increasing overseas payment risks.

Ding explained that for high-value orders worth millions, he adopts a much more cautious approach to payment terms. For procurement-on-behalf arrangements, he refuses to advance funds. “If we are asked to purchase goods from other factories, we only proceed after receiving full payment,” he said. For products manufactured in-house, partial deposits may be accepted, with full payment required before shipment. “At least the goods remain under our control, limiting potential losses.”

Only in exceptional cases involving long-term, highly reputable clients would shipment before full payment be considered.

Even with such caution, Ding has still encountered cases of unpaid balances. In one instance, a long-term client sent photos and videos showing warehouse fire damage before shipment. Based on years of cooperation and trust, Ding agreed to ship the goods without receiving the remaining balance. In his view, the client was not acting fraudulently but was genuinely facing hardship. As the loss was within a tolerable range, he remains hopeful that the overseas partner may eventually recover and settle the outstanding payment.

How to Mitigate Risks

To encourage foreign trade enterprises to purchase insurance, several regions—including Ningbo, Zhejiang Province—have introduced subsidies covering a certain percentage of actual insurance premiums. In Ding’s experience, when properly executed, export credit insurance can recover 60–70% of losses in risk events.

According to the 2024 Policy Function Performance Evaluation Report of China Export Credit Insurance Corporation, released by the Development Research Center of the State Council, Sinosure achieved USD 1.021 trillion in insured volume in 2024, up 10% year on year, surpassing the one-trillion-dollar mark for the first time. It served 198,000 small and micro enterprises, supporting exports worth USD 180.8 billion, representing increases of 16.2% and 8.6%, respectively.

Official Sinosure data further show that in response to sharp changes in the external environment, the company implemented two rounds of special support policies. In the first half of this year, export credit insurance coverage expanded to USD 565.6 billion, up 13.5% year on year, serving 223,000 clients, an increase of 11.9%, covering roughly one-third of China’s foreign trade enterprises. Insured export volume accounted for 27.4% of China’s total exports, up 2 percentage points.

While export credit insurance is an important risk mitigation tool, it is not sufficient on its own. As seen in the earlier case, insurance was in place, but insufficient professional handling and attention to detail resulted in claim difficulties.

Cheng Guang, a foreign trade professional from Guangdong, noted that as his company has matured, greater emphasis has been placed on in-depth research and due diligence on overseas clients. Large orders are only pursued after product sampling, mutual site visits, and multiple rounds of interaction. Despite generally mediocre peak-season orders this year, his company has experienced a sense of “winter solstice giving way to spring” and expects overall export growth for the year.

From a legal perspective, Ma Lang, head of the Criminal Practice Group at Dacheng Shanghai and Director of the Shanghai Bar Association’s Criminal Law and Defense Committee, emphasized that amid rising foreign trade risks, companies should strengthen pre-transaction compliance reviews and consciously retain client identification materials, including images and documentation. In cases of fraud, such evidence can be submitted simultaneously to domestic public security authorities and Chinese embassies or consulates in the client’s country, enabling dual-track reporting both domestically and abroad.

Even if individual losses cannot always be recovered, such actions have significant preventive value. “Once scammers succeed, they are likely to re-enter the country and commit fraud again,” Ma noted. Timely reporting helps place perpetrators under law enforcement scrutiny, disrupts repeat offenses, and contributes to long-term industry-wide risk prevention mechanisms.

According to the 2025 China Export New Growth Drivers and Corporate Confidence Index Report, jointly released by the China Council for the Promotion of International Trade and KPMG China Institute, China’s foreign trade confidence index dropped sharply—from 10.3 in its first 2024 release to -2.2 in 2025. Rising trade barriers and weakening trade conditions were cited as the primary reasons for declining confidence.

Despite the volatility caused by multiple external challenges, including the aforementioned “traps,” the report concludes that China’s foreign trade fundamentals continue to demonstrate strong resilience and vitality. Looking ahead, slower global economic growth and frequent trade frictions may become normalized challenges. However, supported by enhanced product competitiveness, diversified market expansion, robust supply chain systems, and targeted policy support, confidence among China’s foreign trade enterprises is expected to gradually recover.