The Enrichment Of The Law Of Bills Discount In China

Bill discount, as a very important way of short-term financing, has played a significant role in promoting the operation and development of enterprises of all kinds, particularly for the small and medium-sized ones. With the economic development, the need for bill financing has been growing. Over the years, the issuance of bills and their transfer shall be on the basis of real transaction backgrounds in laws and in practice. Therefore, a real transaction background is also indispensable for bill discount. As a result, the operation of financing instruments and other new bill financing business is restrained.However, the traditional bill discount has been unable to meet the need. Therefore, many enterprises have tried to make their bills discounted by faking transaction background, brokers and unauthorized bill market. At the same time, banks have also tried to meet the requirements of real transaction background in the existing laws by business innovation. All of these behaviors have led to potential breach of laws. The main reason why there are so many illegitimate bill discounts in China is that our legal system governing bill discount is defective. In order to provide some theoretical suggestion to polish our bill discount system, the paper has discussed and done some research on some legal issues on bill discount system by methods of survey, comparison and analysis. The main contents include four parts:In the first chapter, the author has introduced business practices of bill discount in China by examining relative regulations in major commercial banks, combined with interviews with their practitioners. This introduction has covered the subjects in the discount business, the scope of bills discount, Standard Operating Procedures and so on. On this basis, the author has analysed and discussed the controversy over the legal nature of bill discount among practitioners, scholars and legislators, and has summarized that the bill discount actually is a kind of bill transaction.In the second chapter, based on the analysis on the legal nature of bill discount, the author has analysed the legal relationships in the business including several relationships between the applicant and the bank to illuminate their rights and obligations and to prevent further disputes.In the third chapter, the author has pointed out problems in the discount business, including the insufficient types, inadequate participants, many discounts with counterfeit transactions background, the existing of unauthorized market and so on. Then, the author has tried to find the main underlying reasons. After a comprehensive analysis, the author has summarized that the main reasons include ambiguous definitions, restrictions imposed by requirements of real transaction background and compulsory types, conflictions among different regulations, etc.In the fourth chapter, the author has made some legal suggestion to address these problems in question as well as providing a better business environment for development of bill discount. The first suggestion is to amend existing laws on bill discount by illuminating the definition of discount, abolishing the rule which imposes the obligation of checking a real transaction background on banks and unifying Standard Operating Procedures. The second suggestion is to remove the provision which prohibits financing bill and legalize financing bill in our Law of Negotiable Instruments. Furthermore, to learn from the successful experience of the developed bill market, and gradually promote the development of financing bill, resulting in a fundamental solution to the current problems in the discount business.In the end, the author has summarized the views of this article, and has drawn a conclusion.