Ex-Im Bank gets to hide bad loans to compete with China

What it does

This bill amends the Export-Import Bank Act to exclude certain U.S. export financings from the bank's default-rate calculation when determining whether it has hit its lending cap. Specifically, it excludes defaults on loans that help U.S. companies replace or compete with products from Chinese entities on the Commerce Department's Entity List or Treasury's sanctions list, or loans made under a China-focused export program. The effect is to allow the Ex-Im Bank to lend more total money by not counting these particular defaults against its statutory cap.

Why we flagged it

The bill's operative mechanism is not a direct subsidy or new program but a technical accounting change that allows the Ex-Im Bank to lend more by excluding certain defaults from its cap calculation. This is a form of regulatory relief for export finance, achieved through a definitional carve-out rather than an appropriation.

What the text implies

• By excluding defaults from the rate calculation, the bill obscures the true performance of Ex-Im loans to China-competing entities, potentially allowing the bank to continue lending to riskier borrowers without triggering statutory caps.
• The exclusion applies only to defaults on loans that meet the China-competition criteria, creating a two-tier risk accounting system where some defaults are invisible to the cap but others are not—this may incentivize the bank to classify loans favorably.

The full analysis lists 4 implications of this text.

Who stands to gain

U.S. exporters competing with Chinese entities; Export-Import Bank (expanded lending capacity); Companies on the Entity List or sanctions list (indirectly, by reducing competition from U.S. firms)