Development Strategies For China's International Factoring Business

International factoring is a kind of comprehensive financial service, which contains services of trade finance, business credit investigation, management of receivables and credit risk guarantee. Due to its function of solving the problems in the deposits and buyer's credit risk it has been used widely and rapidly in the international market recent years. In the global scope, international factoring has already been comparatively mature, but it is just at its starting stage of the development in China and has very limited effect and a small scale here. With the accelerated opening up of Chinese finance, international factoring business has been clearly classified as one of the open items. Chinese commercial banks will face fierce competition from foreign banks and the growing demand for financial services from domestic clients. Therefore, the research on international factoring business becomes an important issue for us.The introduction of this thesis outlines the four ways for international trade settlement: cash, letter of credit, collection and account sale. The proceeds and risk of the importers and exporters are exactly different. In the growing circumstances of today's international buyer's market, in order to secure a greater market share, apart from the low price and high quality goods as a means of competition, the exporters provide the settlement that is beneficial to the importers. It is one of the effective ways to attract customers. Therefore, the account sale which is the most beneficial to the importers becomes popular. But in the account sale, exporters have to face the risk of the lost of both cargo and money. To this moment, as a very good solution for exporters to control the importers' credit risk in commercial credit sales, international factoring is widely used in international trade recent years.Under the current situation of buyer's market, fierce competition of international trade and diverse methods of international settlements, international factoring business meets the demands of development of international trade because of its particular advantages. Consequently, it has gained wide recognition and application in the world market. To make a better research and analysis, the first chapter of this thesis briefly illustrates the origin background, the development, the functions, the characteristics, the operation pattern and the procedures of international factoring, also states that this business is necessary for the development of today's international trade and it is also an advanced settlement method. From the services, the operation pattern and the procedures of international factoring we can easily come to this conclusion: the core strength of international factoring business exists in its both guarantee and financing role in the trade. The business can guarantee the final payment to exporters and the quality of the goods as well as trade financing to importers. The commercial banks and other financial institutions operating international factoring can get a great many profits, high quality customers and good international image. In addition, comparing international factoring with the other means of international settlement, like letter of credit, collection, forfaiting, export credit insurance, the international factoring business owns its unique and comparative advantages.Compared with the rapid development in the foreign countries, international factoring business started relatively late in China and the pace of the development has also been very slow. In a sense, this business is still a plot of rich soil waiting for prompt exploitation. It is an urgent task for us to develop international factoring, which has practical significance and bright market prospects. First, it is the need of development of our economy. China is a great nation of international trade. After entry into WTO, the total volume of import and export is bound to increase by a big margin, which requires advanced instruments of settlement to go with. In the meantime, the large volume of trade also provides basis for the development of international factoring. Second, international factoring will help strengthen the administration of account receivable, lower export risks and gain more overseas customers. Finally, it is an alternative kind of survival for Chinese bank industry itself At present, the competition among commercial banks has been fiercer, which impels banks to seek new ways to increase profits. What is worth mentioning is that we have already opened our financial market gradually, thus many foreign banks and factoring companies will flock into our domestic market before we are prepared to compete with them. If we do not develop international factoring right now, it is undoubtedly that we have to surrender the big domestic market to our foreign competitors.But Chinese international factoring business is still at the development stage. Although in recent years it gets rapid development, the problems remain outstanding. This thesis clearly analyzed the problems existed in the supply of international factoring(banks), the demand of international factoring (corporations), social credit basis and legal environment during the development of international factoring in China.Accordingly, the last chapter of the thesis puts forward some recommendations including: the export company should get to know international factoring comprehensively to change their out-of-date thoughts, establish the concept of commercial credit and risk avoiding; Chinese banks should focus on the small and medium companies as their main customers, pay more attention to marketing, and increase their anti-risk capability to let the exporters enjoy the service of international factoring; the relevant departments of the government should give some support policies for international factoring and improve the law circumstance; professional personnel should be cultivated.In this thesis, the key question is to point out the necessity of developing Chinese international factoring through the analysis on comparative advantage of international factoring business and the problems exits in the course of the development of international factoring. Then some recommendations are put forward to help this business grow healthily and rapidly in order to enable them to converge with the international practice gradually and service our country's foreign trade fully.