On The Legal Issues Of International Factoring In The Context Of Financial Innovation

The demand of international factoring increases rapidly in the global trade because of its simple operating process and financing function. The overseas scholars have had abundant research achievement in the field of international factoring. China started late on factoring, but as the volume of international factoring have risen during the recent years under the background of economic globalization. The scholars in China also do some researches on international factoring. The previous studies focus on:the legal nature of international factoring and the legal relation between the parties, the assignment of accounts receivable in international factoring, the legal risks, and the system establishment on international factoring.The operation modes of international factoring include two-factor system, single factor system, and other systems. Two-factor system is the mode which is used most widely and has outstanding advantages, so the analysis on some legal issues of international factoring is based on this kind of mode. Although there are various types of legal relations between the parties, the credit assignment is the leading legal relation. The factor actually obtains the status of the creditor through the international factoring, and the exporter, the original creditor pull back from the original debtor-creditor relationship. On the due date of the invoice, the importer pays the factor for the invoice from the exporter.In the competitive market, SMES often encounter the risk of account receivable during the sales process. SMES are lack of the ability to investigate the credit status of their clients and the staff that are in charge of account receivable collection, so SMES usually are not able to finish account receivable collection. International factoring helps SMES to solve the problem that the capital is tied up, transfer the credit risk from importer, expand export trade and enhance the competitive strength. For the banks, international factoring increases their income charging the fees of factoring and interest. The small and medium-sized export enterprises have a great demand of the cash flow. Cash flow gap not only generate in accounts receivable period, but also has emerged in the purchase of raw materials and equipment, expand production capacity stage. The financing provided by the international factoring is only applicable after the shipment, but the need of financing before the shipment can not be met. Many small and medium-sized export enterprises are often able to receive a large number of orders from foreign importers, but because their own capital can not purchase raw materials to manufacture, they had no choice but drained away orders. Then, how to innovate the traditional international factoring? After financial innovation, what type of the legal issues and legal risks will the international factoring face? How to build a domestic international factoring system to solve these legal issues, as well as to deal with these legal risks, especially the new legal risks from the innovation in order to maintain the healthy development and innovative vitality of international factoring in China? This thesis does a deeper research on the basis of the existing theory, explores the innovation of international factoring from the point of view of the financing of SMES, and analyzes the relevant legal issues and new types of risks.The paper is divided into six parts:the first part is an introduction part. Introduction to some of the major demonstrating the problem presented, combing the relevant literature of international factoring, and clarify the basic ideas and the main content of this article, research methods and innovation. The second part is the operating, the legal system and the financial innovation of international factoring. It mainly introduces the origin and evolution of factoring in modern times, identifies the legal nature of the international factoring, analyzes the legal relationship between the parties on the international factoring, and explores the domestic and international legal environment of international factoring. In addition, it introduces the main operation modes of the international factoring, analyzes the financing function of international factoring, the applying of traditional international factoring in supply chain to draw forth the international factoring innovation made for pre-purchase and analyze the operation mode of the international Factoring moved to the frond end of supply chain. Part three is on the legal issue on accounts receivable in international factoring. It focuses on analyzing the legal basis and validity of assignment of account receivable and the conflict between the obligees. Part four is the legal difficulties of our factor access system. The fifth part is the analysis of legal risks which the parties will encounter. The last part is the reconstruction of the domestic system of international factoring in the context of financial innovation. This part give some advise to promote the development of China’s international factoring, such as, to improve the domestic laws and regulations, reconstruct factor access system, to perfect risk control.It is clear that if SMES want to make better use of international factoring to financing, there is need to make financial innovation for traditional international factoring. How to solve the legal issues emerged in the development of international factoring, as well as to deal with legal risks particularly the new risks? The answers to these questions are important to the healthy development and innovative vitality of international factoring in China. The thesis make some suggestions on clearing and refining the laws about the factoring, reconstructing Factor access system, strengthening risk management in order to increase the feasibility of the international factoring innovation and strengthen the rapid development of international factoring in our country.