Research On Long-term Credit Risk Prevention

In recent years, along with the vigorous development of the Chinese economy, China has grown into the country with the highest trade dependence of the world’s largest economy, also the second largest economy and the first trading power. The letter of credit has been one of the most important international trade transactions. By virtue of the bank’s reputation as a guarantee, the L\C gets the universal attention and trust of the importers and exporters. Long-term credit is affirmed by the majority of importers and exporters because of its quick and easy advantage. While long-term letters of credit facilitating the majority of traders, risk is also existed. International and complexity of the long-term letters of credit business makes its risk prevention more difficult. This paper first detailed describe the concept of the four common long-term credit characteristics as well as the pros and cons of the both sides of import and export in the long-term credit business, the different points of the four long-term letters of credit were summarized. Second, we defined the concept of the risk of long-term letters of credit, and analysis of the concept and features of the long-term letters of credit risk. From the issuing bank and the traders perspective, the author discusses the long-term credit business, the specific types of risks and the reasons that why they exist. Again, we start from the analysis of long-term credit business case, the using status of the long-term L/C in our country. From all parties, as well as under the regulator’s point of view this paper put forward measures for preventing the risks of usance L/C and separate highlights the false points of credit risk prevention under the usance letter of credit payable at sight. Finally, the conclusion and the insufficiency of this paper are made. Through this paper, the changes of the UCP600bringing to the usance L/C business were described in each chapter, from the specific terms to the implied meaning.