A Study On The Development Of Domestic Letter Of Credit For Chinese Commercial Banks

With the rapid growth of the domestic trade, as a settlement instrument carries the function of both payment and settlement and financing, domestic letter of credit has become an important financing carrier in domestic areas of trade after Bankers’Acceptance. Domestic letter of credit has an immensity potential, meanwhile it brings lots of problems as well. The problems from the uncompleted legal systems, lack of documents of title and lack of professionals have seriously hindered the healthy and long-term development of domestic letter of credit. So it has great practical significance to make studies on the problems appeared in the development of the domestic letter of credit and how to effectively deal with these problems. Only by facing problems and fully analyses the reasons, then we may work out the effective measures to solve the existing problems and prevent new problems that may arise in the future. All these will help enhance the healthy and long-term development of domestic letter of credit.Firstly, by comparative analysis on the domestic trade and international trade, domestic letter of credit and international letter of credit, domestic letter of credit and bankers’acceptance, the financing under domestic trade and traditional working capital loans, and combined with a specific case of using domestic letter of credit to replace bankers’acceptance, this paper makes analysis on the advantages of domestic letter of credit, and discuss on the problems existing and the reasons of the problems. Secondly, as A bank for example, this paper describes the development situation of domestic letter of credit and financing products under it, also, through the SWOT analysis this paper makes analysis on the advantages, weaknesses, opportunities and threats of banks A’s development of the domestic letter of credit. Finally, Considering the overall situation and banks A’s specific case of domestic letter of credit, this paper make in-depth discuss on the development direction and product innovation of domestic letter of credit. Also this paper proposes the countermeasures and suggestions on the development of domestic letter of credit and financing business under it. This paper makes conclusion that all relevant aspects should make efforts to complete the legal system, accelerate the pace of legislation, introduce relevant judicial interpretations, clear the title and mortgage of the document under domestic letter of credit, perfect "People’s Bank of China Measures for Settlement by Domestic Letter of Credit", develop a unified single trial standards as soon as possible. And the commercial banks should actively promote a sound legal system of domestic letter of credit, simultaneity the commercial banks should strengthen the risk control, impel product innovation, and promote domestic letter of credit in Supply Chain Finance. This paper offers reference to how to develop the business of domestic letter of credit in the further.