Studies Of Some Legal Problems On The Risks Control Of China’s Credit Guarantee Institutions

Small and medium enterprises (SMEs), as the most active force inthe modern economic life, play a vital role in supporting economicgrowth, settling employment, promoting scientific and technologicalprogress, and maintaining social stability, etc. It is the power topromote economic development that cannot be replaced. Both indeveloped and developing countries, SMEs have become or arebecoming an important pillar of the national economy, thedevelopment of which cannot be ignored. However, the developmentof SMEs is facing a number of hindering factors, of which financingdifficulty is a key problem.Credit guarantees institutions are taken as the specializedinstitutions to provide credit guarantees for SME financing, playing anirreplaceable role to solve the problems of SME financing and tosupport the development of SMEs. However, because of the smallscale, weak profitability and low credit rating of SMEs, institutions toprovide the guarantee of SMEs have to face a higher business risk. Atpresent, China’s credit guarantee legal system and risk controlmechanism are not perfect. With their poor ability to prevent andcontrol risk, too much risk focuses on the credit guarantee institutions.Besides, excessive concentration of risk and high rate of compensationcan weaken the guarantee ability of these institutions, which canseriously affect the credit guarantee institutions achieving the functionto resolve SME financing problems. Therefore, starting from the actualrisk of credit guarantee institutions, drawing on the mature experience of foreign countries, and establishing a realistic credit guarantee legalsystem and risk control mechanism become the key to improving thecapabilities of risk prevention and control, so as to solve SMEfinancing difficulties.This paper studies the legal issues of risk control of China’s creditguarantee institutions from the following four parts:The first section introduces the basic theory of credit guaranteeinstitutions. This chapter firstly introduces and analyzes the meaning,historical development and legal nature of credit guarantee; thenfocuses on the economics and jurisprudence basis of the creditguarantee system to find a theoretical basis for the credit guaranteesystem; and finally lays the foundation for risk prevention and controlsystem through studying the source of the risk and conduction path.The second part is the international comparative analysis betweenrisk control legislation and practice of credit guarantee institutions. Onthis basis, this part summarizes mature experience, providing usefulreference to perfect the mechanism of risk control in China.The third part explores the concrete manifestation and causes.The current manifestations of the risks from China’s credit guaranteeinstitutions are summarized as compensatory risk, liquidity risk andreputational risk. The causes of these lie in the defects and deficienciesof China’s credit guarantee legal system, as well as the internal andexternal risk control system of guarantee institutions.The last part, according to the causes and referring to foreignadvanced legislative and practical experience, puts forward legaladvice for perfecting the risk control system of China’s creditguarantee institutions from aspects of the establishment of creditguarantee legal system, internal and external risk control of guaranteeinstitutions, etc.