Forfaiting Business Development In China's Commercial Banks

Forfaiting is a financial instrument. The Forfaitor buys draft or promissory note, which is usually accepted by exporter's bank , from importer without any recourse. As a simple way of finance, Forfaiting business has a long history in international financial market, but is still a new course for Chinese commercial banks, their acknowledgement, technique and market strategy in just on the first step.In this article, two clues have been clearly identified: Risk and Profitability. The risk includes credit risk, technique risk and operation risk etc.. To raise the profit, commercial bank must make sure the risk is under control. At the same time, Chinese banks need to grasp international practices and the law in different countries. Only in this way could Chinese banks make profit for themselves and achieve their market goals.Five chapters compose this article:Chapter one: out line of Forfaiting. It introduces the different definition in different countries andbanks, demonstrates the procedure of a typical Forfaiting Business, indicates the key factors whichaffect Forfaiting price.Chapter two: some issues worth of research. Including the draft, differed payment L/C, therelationship between L/C issuing bank, negotiating bank and Forfaitor and how to understand"without recourse".Chapter three: the possibility for Chinese commercial banks to develop Forfaiting business.Comparing with other financial instruments, Forfaiting has its own advantages. Chinese markethas real demand for Forfaiting business. All in all, China has possessed the basic qualification todevelop Forfaiting Business.Chapter four: promotion strategy. Chinese banks have both advantages and disadvantages incompeting with foreign banks. The promotion strategy includes: training strategy, marketingstrategy etc.Chapter five: the trend of Forfaiting's development. Since the on-line business is developing sofast, most of the Forfaiting will be done trough internet in the near future.Conclusion: the development of international trade and the rising demand of import and export corporation provide favorable environment for Forfaiting business. Chinese banks must take the opportunities to absorb greater market share and interests. We have the confidence to welcome a bright future of Forfaiting business.