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insured by FCIA in 1988 totalled $32 million, which represents 800 man-years of U.S. labor. (Also, as of May 31, 1989 FCIA, insurance exposure was $18 million.)

Since 1981 Eximbank has approved loans in a total amount of $497 million for U.S. exports of goods and services to 12 projects in China. As of May 31, 1989 loan repayments have reduced the current exposure on these loans to $439 million. Eximbank financing has supported the following: 4 electric power projects, a coal mine, a tire factory, container refrigeration units, 2 chemical plants, a TV color picture tube glass plant and a steel tube plant.

Eximbank direct loan financing for all of these projects at the subsidized OECD rate was needed to enable U.S. exporters to compete against foreign suppliers which were supported in each case by subsidized financing from their government export credit agencies. In fact, most OECD countries provide tied aid (mixed) credits to China with low interest rates and long repayment terms which are much more concessionary than the standard OECD export credit terms normally provided by Eximbank.

To understand the competitive situation leading to Eximbank financing support for exports to China it should be noted that the other 24 major industrial countries in the OECD, as well as such major exporting countries outside the OECD as Korea and Brazil, all have governmental financing agencies which support their exporters. Their support programs provide insurance or guarantees and interest rate subsidies which are similar to what Eximbank and FCIA provide, although individual country

institutional structures may vary.

In terms of levels of existing export financing commitments other countries are far higher than Eximbank. The most recent

comparative data available to us (December 31, 1988) show the following rankings of major exporting countries to China for existing commitments and outstanding offers ($ millions):

*Includes amounts undisbursed as well as disbursements less Also includes interest due on future repayment

repayments.

to lenders.

In addition to this activity on normal export financing terms, most OECD countries also have established programs of tied aid (or mixed) credit financing for China. These vary in form but they usually provide long-term, low interest-rate loans, or grants mixed with loans, tied to exports from the donor country. Under OECD procedures such concessional financing must be notified to other OECD members. The following table summarizes the notifications of offers to China in recent years

($ millions):

The U.S. made no tied-aid offers during these four years. U.S. exports to China in CY 1988 totaled $5,039 million, of which about $1,241 million were in various sectors of capital equipment which typically require medium or long-term financing. The bulk of U.S. capital equipment exports to China has been on cash terms or financed by commercial banks or suppliers without Eximbank or FCIA assistance. This reflected the private perception that China has been creditworthy without need for Eximbank/FCIA guarantees or insurance, and that in certain sectors U.S. firms had a competitive edge. However, in other sectors suppliers of other countries have been highly competitive technically and have been aggressively supported by export credit and tied aid financing from their governments. It is in these sectors that Eximbank has received most of its requests in order to keep U.S. exporters competitive, namely:

electric power
coal mining

telecommunications

airport navigation and radars

transportation

petrochemical production

machine tools

oil and gas development

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Private suppliers and commercial banks can offer only market financing at floating interest rates and repayment terms of 5 to 7 years. However, to be competitive with financing from other governments Eximbank has been needed to provide the subsidized interest rate and repayment terms up to 10 years allowed under The Arrangement.

The magnitude of tied aid activity by other governments indicated above has also affected the ability of U.S. suppliers to compete in the China market. The U.S. does not have a similar tied aid credit program. Under Congressional and Administration policies Eximbank currently provides tied aid offers from the limited "War Chest" appropriation only in order to enforce discipline in the 1987 OECD agreement to restrict the use of tied aid credits. In other words, we respond with an offer only in circumstances where another government violates the rules on minimum grant element and/or transparency (notification). In China there have been only two such circumstances in 1988: one was lost and one was won by the U.S. supplier with a contract of about $20 million.

Now, let me focus on the types of transactions for which Eximbank currently has applications for medium- or long-term financing to support new bids by U.S. exporters in China. As I mentioned earlier, these applications are being processed normally, but will not receive final consideration unless it is clear that the U.S. supplier will lose the business in the absence of an Exim financing offer. We find that many exporters are now encountering delays of unpredictable duration in their negotiations.

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The applications currently in the Bank include exports to

two electric power projects, a car and van manufacturing facility, a chemical plant, a vehicle fuel plant, airport radar and communication equipment, telecommunications equipment, oil and gas field development, and a petroleum coker plant. The export value of these requests from U.S. suppliers total $324.7 million. Of course, whether we make a financing offer will depend upon the exporter actually having a real bid situation. In addition, all of these are competitive transactions, so it would be difficult to predict how many would result in U.S. sales or Eximbank financing even if we make an offer.

In addition to these applications, Eximbank has financing offers outstanding to suppliers for exports with total value of $161.2 million. These include equipment for a subway project, a corn processing plant, telecommunications, a tire plant and an electric power plant. Again, how much of this will proceed to firm contracts with Eximbank financing will depend upon whether the supplier negotiations proceed and whether the U.S. supply and financing package is competitive.

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You have asked our view of the consequences for the United States, the Chinese economy and China's other trading partners if Eximbank financing for China were to be reduced or terminated. assume that your question is addressed to new financing offers for China, rather than termination of existing loans which are being disbursed or suspending conversions to final commitments of offers we have made where the exporter wins a contract based on our offer. This point should be clear in all our discussions, because we believe we must avoid situations which could result in