Forfeiting Financing Methods In International Trade, Risk And Its Prevention

Forfaiting Financing is one of comparative new methods of trade financing in China. It buys trade debt or the receivable account produced by international trades in the manner of discount without recourse. If the liquidity debt vehicle certificating the debt is refused to pay by debtor or warrantor due to the date, then the holder (Forfaiting trader) would have not any recourse to the former or exporter.Forfaiting originated in the international trade between western countries and eastern countries after World War 2. In that time, it was Zurich Banking Community that firstly gave its Forfaiting services among the grain export trades from U.S.A. to East Countries. The trade could become true only when Zurich Banking Community bought notes given by East European Countries importers, hold by U.S.A' s exporters and paid in future without Recourse. Thus, the exporters could acquire money at once and the trade between them could go on.In 1980s, due to plagued by the third world debt crisis, the normal bank credit service was limited. This made Forfeiting services develop rapidly and it slowly enlarged from European to Asia and the world. The transaction manners were daily flexible. The amount of transaction was enlarged day by day, and a Forfaiting transaction market is formed in the world.Nowadays, the unique advantages of Forfaiting financing in medium-long trade financing have made it rapidly develop in many countries.With China entry into WTO and our finance industry opening up to the outer world, it is unavoidable that many Forfaiting-fund banks will give their business in our country. The competitions in the future will be violent. The Forfaiting traders of our countries should prepare well. In the view of this, I want to write this paper to hope that it makes people understand this kind of new trade financing manner, meanwhile I also want to try giving my answers to the questions of the risks and risk prevention which are especially concerned by domestic Forfaiting traders.There is a history of more than fifty years in European, but in China, Forfaiting is a comparative new business and many domestic exporters know nothing about it. I, here, want to say something about Forfaiting such as itscoming into being, development and other characteristics, etc. Then it will be easy to research and analysis how this kind of business can smoothly develop in China and promote Chinese trade and economy in present Chinese finance and trade systems.There are five chapters in this article. In first chapter, I give the statement of how the business emerging and its characteristics as a kind of financing method. Then I detail the risks adopting this kind of financing method will face in China and give my opinions to deal with them in follow four chapters.Su Zhaoqian (International Trade) Directed by Yu Siqin...