On The Legal System Of China’s Pawn Financing

Pawn loan is a way of financing which is regularly repaid, money-based and secured with pledge or mortgage. Its principle is confirm the price based on fixed mortgage lending, and only focus on pawns themselves rather than their owners. With the rapid development of modern finance, financing pawn, with its simple and efficient features, has become the most effective means of financing of small and micro enterprises. But China’s current development of the pawn industry is very slow. If we chase back, this relates directly to the vague legislative understanding of the nature of pawn, the unclear legal status of pawn industry, the unreasonable structure of relevant systematic design and the lack of relevant judicial rules.This paper analyzes the basic theoretical foundation of pawn financing, summaries the imperfection of relevant laws and regulations, the unreasonable financing system, and unsound regulatory regime and set out suggestions in relation to the perfection of the regimes over pawn financing from the aspects of legislation, financing system and supervisory system by reference to the advanced legal, financing and supervisory systems of foreign jurisdictions..This paper consists of five chapters, the details of which are as follows:Chapter I describes the basic theory of finance pawn, Firstly, it discusses the origin and the concept of the pawn to make a clear definition of the concept of pawn financing, namely it is as a compound word consisting of two Chinese characters importing the same meaning, referring to the provision of financing services secured by moveable properties, property rights and real properties by specialised pawn shops to their customers.Secondly, it analyses the development of pawn financing since the 1987 revival by reference to the history of financing pawn in China. This paper argues that China’s pawn financing has been developing fast from an overall prospective in terms of the amounts, total registered capital and quantities as a special way of financing. On one hand it always meets the different needs of small and micro enterprises and other people for funds, to make up for lack of bank credit, on the other hand it plays a positive role in enhancing the capacity of financial innovation, improving the financial service system and improving the credit structure, which points out the necessity to specify the status of pawnshop in our financial system.Thirdly, for the current vague status of the legal relationship in pawn transactions, this author discusses the current three theories on the legal relationship—— the creditor right theory, property right theory and commercial pledge theory. and puts forward the author’s own point of view- pawn is more than a pure facility or surety, but a combination of different legal relationships, which paves the way for viewing pawn as a legal relationship separate from other legal relationships from legislative prospective. This chapter is mainly to provide the necessary theoretical arguments and supporting facts for improving the overall framework of the legal system of pawn.Chapter II encompasses a deep theoretical analysis and research on legal theory of pawn financing. Firstly, it analyzes the existing risk of pawn financingfrom three aspects: market risk, operational risk and policy risk, and accordingly propose means of risk prevention from three aspects: the standard operating procedures, internal control system and cooperate with the insurance company; Secondly, based on the deep analysis of the basic theory of pawn financing, it analyzes the shortages of China’s current pawn from the aspects of legislation, financing and supervision.Chapter III analyzes the pawn financing legal system of United States, China’s Taiwan Region and Hong Kong SAR, the chain business model of US, the establishment of relevant regulatory regime in Taiwan Region, and the critical role of the pawn industry association in Hong Kong, which are instructive to the ongoing development and perfection of relevant legislation in China Mainland.Chapter IV relates to the reconstruction of China’s legal system of pawn financing. and renders legislative advice on realizing sustainable development in China’s pawn financing sector: Firstly, the guiding ideology is to encourage diverse operation pawn shops to make use of individual strengths in the face of the competition of commercial banks and other financial institutions as well as small loan companies, finance guarantee companies and other quasi financial institutions; Secondly, the legislative level for pawn related legislation should be enhanced. The legislature should introduce "Pawn Law" and "Pawn Management Regulations" to regulate the civil and regulatory legal relationship in pawn transactions and improve the legal environment for China’s pawn financing as soon as possible; Thirdly, in terms of the regulatory regime, first of all,this author believes it should be raised as soon as possible and incorporated into the legal framework, including the construction of laws, administrative regulations, government regulations, etc., followed by explore to establish a special regulatory authorities, to supervise pawn shops, small loan companies and other financial institutions to achieve professional configuration. Thirdly, it should give full play to the role of "national pawn industry supervision and management information system" and the pawn industry associations, to guide sustained, healthy and stable development of pawn industry; Fourthly, build a sound legal system of financing the pawn industry, it can try to cooperate with P2 P platform for asset securitization pilot, and combined with Internet banking, expand financing channels pawnshop.Chapter V forms the conclusion of this article, which takes an overview on how to improve the legal system of pawn financing. This paper restated the concept of mortgage financing, property, legal relationship theory, and on the basis of summing up the history of pawnshop and the development of the legal system of pawn in our country, to basically clarify the shortcomings and limitations of current institutional from three areas: legislation, financing, regulatory pawn laws. Then stressed that in order to ensure the stability of legislation,it is necessary to unified the concept of mortgage financing, and its property and legal relations to make the position of pawn financing in the financial system clear. And combining foreign advanced pawn legal construction to propose for mortgage financing system built to perfection on the legal systems.