The Legal Risks Faced By Chinese Factors In International Factoring And Preventive Measures

International factoring is an alternative method of international settlement and financing. Under the current situation of international buyer’s market and diverse methods of international settlement, international factoring has been taken as the most important settlement method of international trade in the world. Due to China’s economic development and international trade activity in recent years, international and domestic factoring in China has made great progress. China has become the world’s largest factoring market.Although the international factoring is importance to our country, its business practices are not formed in the financial and trade practice of our country, and the study of factoring business practices and laws and regulations of our country is not intensive and thorough. The relevant law has been absent for over 20 years, and even the recent adopted regulation in 2013 has many defects. The cases of factoring disputes are rarely disclosed. With the share of international factoring in the China and expanding international trade market, accumulated risks are hidden behind China’s prosperous factoring market. Therefore, the research of legal risk and preventive measures of international factoring needs to be enriched and perfected.This paper intends to analyze the combination of theory and cases by using the inductive knowledge to evaluate the recent factoring legislation and to supply some suggestions about lawmaking. This paper takes the international two-factor system as a framework, and comprehensively concludes legal risks which are faced by the export factor and the import factor, then puts forward the corresponding preventive measures, through the comparative analysis of law and international factoring practice. Based on the interpretation and defects of China’s latest factoring legislation, this paper put forward suggestions on improving the factoring legislation.In view above, this paper consists of four chapters. The first chapter is to introduce the basic knowledge of international factoring such as its concept, characteristics, operating systems and basic legal relationship between parties. The second chapter analyses the legal risks faced by factors in international factoring by combining theory and cases. Because of the international factoring covers different countries, the applicable law becomes the first risk in the factoring practice. Under the system of two-factor, the factors not only bear the operational risk and credit risk from exporter and importer, but also bear the risk from each other. The third chapter puts forward the preventive measures by combining foreign mature factoring customs and practices. These preventive measures can effectively avoid the occurrence of legal risk, and can be a reference and basis for factoring legislation. The first part of the fourth chapter interprets our latest factoring legislation and finds defects in order to improve legislation in the future; the second part puts forward the suggestion on factoring lawmaking in the context of China’s legal environment in order to create a more perfect legal environment for international and domestic factoring practice.