| International trade financing is the accommodation of funds provided by a variety of trade financing institutions to participants in international business during the process of international trade, which has long been the indispensible lubricant in the development of international trade in contemporary world. As early as medieval times the rudiments of international trade financing came into being as the credit behavior among merchants from different countries. With the passage of time and evolution of economy, international trade financing, along with its basis-international settlement continued changing, expanding its applicable scope and deepening its influence. Nowadays, it has evolved into one of the most important financial services. According to the estimation by International Chamber of Commerce, approximately 80% of the global trade needs involvement of trade financing. Governments across the globe all view international trade financing as an efficacious weapon to regulate macro external trade. Via establishing policy trade financing institutions and directing commercial trade financing institutions they wield the trade financing to promote the healthy development of national economy. In countries where financial industry is mature and sophisticated, revenue from operation of trade financing business accounts for more than 40% of the total revenue of the bank; these countries are typically the pioneers in the innovation of international trade financing. The progress of international trade entails more effective, secure and economic means of settlement, which has induced the innovation of international trade financing. Traditionally, the conventional trade financing instruments such as Bill Discount and Packing Loans were heavily resorted to as primary channels to accommodate funds while now modern trade financing instruments like Factoring, Forfaiting, Structured Trade Financing and Supply Chain Financing are becoming increasingly popular.It is an unquestionable fact that China has achieved astounding economic feats over the past three decades, which is commonly ascribed to the high-speed development of its external trade, export in particular. In 2010, China's GDP surpassed 39 trillion Yuan, becoming the second largest economy in the world. The aggregate value of export and import amounted to over 15 trillion Yuan, among which export value summed to over 10 trillion Yuan, representing 26.37% of the GDP. According to the statistics of previous years, it is anticipated that the external trade of China will continue to seize a considerable portion of its national economy. Undoubtedly, the progress of international settlement and international trade financing is essential to these attainments. The scale of international trade financing in China has maintained strong momentum in growth, exceeding 450 billion US Dollars in 2010 in addition to an increasing number of trade financing institutions.However, it is also worth pointing out that despite the increase in the number of products and aggregate volume of international trade financing in China, there still exist quite a few limitations compared with developed countries. Therefore, it is necessary to conduct an exhaustive examination of the status quo of international trade financing in China and identify the problems and corresponding resolutions. From the academic point of view, it is a blank area to comprehensively and systematically analyze the international trade financing in China. The majority of researchers concentrated their effort on the study on theories and practice of international settlement. The small quantity of researches into international trade financing are primarily based on case study of individual commercial banks or innovation of certain trade financing products while the full-dimensional analysis of the development, status quo, implications, problems and according countermeasures are absent. From the practical point of view, it is of equal significance to pinpoint the impediments of China's international trade financing and formulate viable proposals so as to enhance the competence of Chinese trade financing institutions, enliven the trade financing market, sharpen the competitive edge of Chinese enterprises and ultimately promote the development of China's international trade. By means of extensively collecting up-to-date statistics and review the latest development of domestic and overseas trade financing market, this dissertation is aimed to present a thorough analysis of the status quo of China's trade financing market, locate the hindrance and propose countermeasures with the purpose of facilitating the future progress of international trade financing in China. The dissertation consists of seven chapters, each assigned to probe into one aspect of the subject.The First Chapter is the "Introduction", which describes the research background, significance, objective, methodology and the dissertation structure. Besides, it also includes review and comparison of both domestic and overseas studies on this subject in addition to enumeration of the innovative points of the dissertation.The Second Chapter is the "Overview of International Trade Financing", which comprises the discussion of relevant concepts, evolution and classification of international trade financing, in addition to enumeration of trade financing instruments and summarization of characteristics of international trade financing. International trade financing is defined as the credit support offered to exporters and importers with the aim to facilitate the international trade. Historically, international trade initially exhibited in the form of commercial credit provided by one party to another in cross-national trade, such as Open Account and Consignment. The fast advancement of international trade such as the enlarging transaction value posed new requirements for trade financing; banks and other financial institutions started to take the lead in promoting international trade financing and innovating trade financing products. From the medieval times to lassie-faire capitalism to monopolistic capitalism and eventually to the contemporary times, the trade financing instruments have continued to be enriched, which can be categorized against different criteria as short-term trade financing and medium-and-long-term trade financing, import trade financing and export trade financing, commercial trade financing and policy trade financing, collateralized loan and uncollateralized loan, conventional trade financing and modern trade financing. In this dissertation, various trade financing products are itemized in two groups, i.e. conventional trade financing products and modern trade financing products. The former category includes Export Credit, Import Credit, Export and Credit Insurance, Packing Loan, Export Bill Purchase, Export Bill Discount, Export Invoice Discount, Account Receivable Purchase, Issuing L/C with Credit Line, Import Bill Advance, Shipping Guarantee, Usance L/C payable at sight, Trust Receipt Finance, Outward Remittance Advance. The latter group encompasses Forfaiting, Factoring, Structured Trade Financing and Supply Chain Financing. Moreover, international trade financing is characterized by high complexity of subjects and objects, high risks and being regulated.The Third Chapter is the "Interplay between International Trade and International Trade Financing". On the one hand, during the development of international trade, the market condition of the world market has changed from seller's market to buyer's market; at the same time, the scale of international trade has also become increasingly large; international transaction requires growingly higher efficiency. All these factors have induced evolution of international trade financing. On the other hand, international trade financing, as a kind of financial service, is typified by better security of funds, greater liquidity, higher profitability and favorable credit terms, thereby extensively welcomed by importers, exporters and financial institutions. Through various channels such as risk diversification, funds allocation and transaction facilitation, international trade exerted significant effect on international trade and moreover the national economy. From the macro perspective, the empirical study on South Korea and China demonstrates that trade financing can facilitate the accumulation of national wealth and improvement of economic structure. From the micro perspective, it can assist the bank to obtain larger returns on safer basis and enhance the international competiveness of enterprises.The Fourth Chapter is the "Status Quo of International Trade Financing in China". Currently, there are two groups of international trade financing institutions in China, i.e. policy trade financing institutions and commercial trade financing institutions. The former are financial institutions funded and owned by the government, which provide targeted comparatively favorable financial service according to the national macroeconomic policy in order to prompt the healthy development of China's economy. The latter group is comprised by Chinese and foreign commercial banks which earn charges and commissions by offering accommodation of funds to exporters and importers in reliance on their network of branches and overseas associate banks. Based on the "Summary of Sources & Uses of Funds of Financial Institutions (in Foreign Currency)" complied by the People's Bank of China, in this dissertation the aggregate volume of international trade financing in China from 2002 to 2010 is estimated, which exhibits an upward trend. With regard to commercial trade financing, the operation of some representative large state-owned banks is examined. It indicates that Chinese commercial banks have made remarkable strides in terms of the number of trade financing products and volume of international trade financing. With reference to the policy trade financing, three policy trade financing institutions are analyzed respectively, i.e. China Development Bank, Export-Import Bank of China and China Export and Credit Insurance Corporation, all of which have maintained steady increase in providing favorable trade financing to particular industries. It is tremendously instrumental in the optimization of export structure and improvement of industry structure of China.The Fifth Chapter is "Prospects of International Trade Financing in China". On the basis of the comprehensive study on the status quo of China's international trade financing, the prospects of the development of trade financing in China are also discussed in the dissertation; several trends are summarized and enumerated, including great room for further development, pluralization of trade financing institutions, diversification of trade financing modes, increasing importance of import trade financing, and deepening functions of trade financing.The Sixth Chapter is "Problems of International Trade Financing in China and Countermeasures". In spite of the great advancement of international trade financing in China, there are still many impediments retarding its full development, leading to the conspicuous backwardness in this area compared with developed countries. It is evident that China has lagged far behind in the operation of modern trade financing instruments. Specifically, the scale of International Factoring is small, the Structured Trade Financing is immature and the development of Forfaiting business is impeded. Moreover, due to the deteriorated trade financing environment, increasing difficulty in applying for trade financing and bank's deficient attention on SME trade financing, SMEs have been confronted with considerable difficulty in accessing trade financing. As for trade financing environment and system, a consummate legal setting and trade financing system are absent. Regarding the banks, their organizational structure, personnel competence, banking techniques and risk control system still need to be improved. With respect to the enterprises, the development of international trade financing is also hamstrung by the inferior management. According to the above conclusions based on the analysis, a number of viable proposals aimed to promote the international trade financing in China have been suggested in the dissertation. With respect to the government, the authority should make efforts to forge favorable external environment, which encompasses constructing and perfecting of legal and market settings, bettering trade financing system, strengthening the credit rating system of foreign trade enterprises, and reinforcing the support for SMEs. Regarding the banks, they shall strive to streamline the current trade financing services through establishing standardized risk management and internal control mechanism, improving personnel competence and organization structure, upgrading techniques and innovating services and consolidating the support for SMEs. As for the enterprises, they ought to focus on enhancing trade financing ability by increasing awareness of risk prevention and improving the management quality of the enterprise.The Seventh Chapter is the "Conclusion", in which the gist of the dissertation is summarized.Based on the results of prior studies and trade financing service promotion from various trade financing institutions, systematization of main current trade financing instruments in China is completed in the dissertation in which a series of research methodologies are employed. It incorporates comprehensive analysis of the situation of a variety of trade financing institutions in China and a great quantity of data pertinent to the subject. Subsequently, the characteristics of the status quo of the development of China's international trade financing are concluded. Along with the discussion of the new changes of trade financing in a global scope, the future trends of the development of international trade financing in China are predicted. Furthermore, after identifying the problems concerning the trade financing, more realistic propositions have been proposed. International trade financing have experienced preliminary development and generated huge facilitating effect on the progress of international trade and national economy. Despite the exiting problems, we have reasons to believe as long as the feasible countermeasures are implemented effectively, under the joint direction of the market and authorities concerned, China's international trade financing can maintain the good momentum in future development. |
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