International Factoring - Financial Innovation and Legal Practice

Author: Huang Bin
Publisher:
Publish Date: 2006-08-01
Features: Factoring (factoring) originated in international trade, providing a comprehensive financial service that integrates sales account management, accounts receivable collection, credit risk guarantee, and trade financing for trade credit. In the modern sense, factoring business began in the late 19th century in the United States and then flourished in Europe, today expanding globally. Currently, factoring in China is still considered an innovative financial business. According to figures provided by FCI (International Factoring Council), by 2001, factoring accounted for 44% of the global trade settlement share, surpassing letters of credit in volume. Some scholars also refer to factoring, letters of credit, and credit insurance as the "three horses of debt protection." However, the scale of international factoring in China remains small, far lagging behind its birthplaces of Europe and America, and also significantly behind Japan, another Asian country. This is highly inconsistent with China's status as a major export trading nation. On one hand, it highlights the obvious gap, and on the other hand, it indicates that the vast potential of factoring business in China has yet to be fully developed. In March 2002, when the Nanjing branch of Bank of Communications failed to provide non-recourse domestic factoring services, Ericsson "switched sides" to Citibank, causing considerable shock in the domestic financial industry and sparking intense discussions and deep reflection among Chinese banks. Personally, I believe one of the core issues in the "Ericsson incident" lies in the unresolved legal challenges faced by domestic banks when handling factoring, which has constrained the innovative pace of domestic banks in this field. Therefore, by combining the legal theory and practice of factoring business abroad, as well as the provisions of relevant international conventions and customs, a thorough study of the legal issues in factoring business and resolving China's legal challenges in this area will greatly promote the development of this internationally growing new financial product in China and enhance the business competitiveness of Chinese banks. This book aims to propose some legal issues faced by commercial banks in the current international factoring business and explore ways and means to address these issues, striving to achieve a "soft landing" for international factoring business within China's legal environment in theory.