Foreign Trade With Trade Financing, A Comparative Study

There are two forms of international trade , including common trade and processing trade . Both of them are playing important roles in China's international trade . Processing trade can be divided into supplied materials processing and imported materials processing , of which the latter is the major portion . International trade is more risky , needs more capital and takes more time than domestic trade . Therefore , trade finance is very necessary . Because of the differences between common trade and processing trade , their trade finance differ consequently . But common trade and trade of imported materials processing are similar in terms of trade finance . In practice , enterprises engaged in supplied materials processing choose reciprocal L/C , L/G , and documentary collection , when they need trade finance . If one of them select documentary collection , its documentary collection should be D/P , and its commercial counterpart's should be D/A . Enterprises engaged in imported materials processing and common trade need trade finance in the whole period of their functioning . In the period of purchasing raw materials , they can apply for inward bill receivables and delivery against bank guarantee . During the course of producing , they can choose packing loan . In the order of sales promotion , they can select factoring , forfaiting and export credit. During the period of debt collection , they can apply for negotiation under documentary credit, advance against documentary collection, discounting, and export insurance .There are three types of companies engaged in common trade . The first type of companies act as other companies' agent in international trade . The second type of enterprises deal in self-conducted trade, while the third type of enterprises are manufacturing entities . Different types of enterprises need different forms of trade finance.In China, three forms of trade finance including factoring , forfaiting , and export insurance will develop distinctively in the near future , which is necessary for meeting the need of foreign trade companies...