Loan Guarantee System In China Legal Issues

The loan security system is a legal system that assures the borrower to discharge the loan on schedule on the basis of the specified property of borrower or the third party or the credit of the third party. The aim of this system is to guarantee the safety of credit capital of lender and recall the principal and interest.The development of Chinese loan security system has gone through three phases, the loan security system in planned economy period, reform and opening period and after the issuing of security law. It has formed a comparatively independent and integral system. But because of many subjective and objective factors, there are a lot of problems of our existing loan security system needing solution urgently.On the basis of introducing the general theory of loan security system, the articleanalyzes the intrinsic malpractice of traditional loan security method and somecontroversial problems of loan security system, through the characters of traditionalloan security method (warranty, mortgage pledge) and provisions of current legalsystem of loan security. The article put forward three measures of perfecting thissystem. The first is drawing lessons from the legal provisions of foreign countries,which have mature market. According to our actual situation, we should make up thedefections in relative provisions of loan security system and accomplish variouselementary systems of loan security. The second is adding new methods of loansecurity and promoting the modernization of loan security legislation. Such as,creating trust security system to relieve the difficult position of traditional loansecurity method; drafting independent security system(in internal finance)to progressfinancial activity .The third is establishing perfect credit security system of small-andmedium-size enterprise and assuring the healthy development of our credit securitytrade.