Academic journal article Canadian Social Science

Secured Transactions under China and US Law

Academic journal article Canadian Social Science

Secured Transactions under China and US Law

Article excerpt

Abstract

The secured-credit law is key of modern commercial transactions. Under China's Property Law, some aspects in terms of secured transactions have been improved with comparison to Security Law (1995), but it is considered to be unsatisfactory. The purpose of this article is to examine the very significant problems of China law on secured transactions, including the narrow range of the movable collateral, the lack of centralized registration system and the cumbersome enforcement process. For a reference, this paper takes Article 9 of United States Uniform Commercial Code as a model to compare the differences in Secured Transactions between China and US: Article 9 made it possible for secured transactions to be conducted with maximum flexibility and efficiency. Based on the reference point, this research also tries to find out to what extent it could be imported to China.

Key Words: Secured transactions; Article 9; Registration; Enforcement

INTRODUCTION

It is well known that Article 9 on secured transactions of UCC is a paragon of secured-credit law. Many countries all over the world (e.g. Canada, New Zealand, Australia, Mexico, Gaza, and so forth) have followed the Article 9 model to reform their domestic secured-transactions laws. Even some Central and Eastern European countries with long civil law traditions have embraced key principles of the UCC, in an attempt to develop modern secured financing systems. Moreover, the Article 9 of UCC has influenced remarkably on model secured-transactions laws, such as the Legislative Guide on Secured Transactions (Guide) issued by the United Nations Commission on International Trade Law (UNCITRAL). It provides developing countries with a model code, and it also acknowledges the difficulties that may arise in the process of legal reform. It mainly aims to achieve harmonization of international trade and commercial law.

An efficient, workable, and well-enforced secured-transactions law has been widely considered to exert a dramatic impact on economic development and would bring positive results. It allows for individuals or entities to use personal property as collaterals. Specifically, it provides more chances for small and medium enterprises, which rarely have lands and buildings for loans, to enter into the credit markets. Furthermore, it is expected to make marketplace for credit significantly more efficient and facilitate domestic economic growth. In order to make this positive source play a better role in economic growth, the establishment of predictable systems of secured lending through the reform of secured transactions laws is essential.

In this decade, China is also being taking efforts to reform the existing secured-credit law system to keep pace with the demands of the country's rapidly growing economy, including revising provisions of the 1995 Security Law to become part of the 2007 Property Law. This is China's first comprehensive law on ownership and use of different types of property rights. It includes a chapter on security in real and personal property (Su, 2007). However, it is not enough. Many changes should be made to support a modem secured financing system.

In general, this paper will discuss the following four major aspects of secured financing law in China and US: conception of security interest, scope of movable collateral, perfection and enforcement of security interest.

1. CONCEPTION OF SECURITY INTEREST

Article 9 of UCC "applies to a transaction, regardless of its form, that creates a security in personal property or fixture by contract". It adopts a unitary concept of security, which replaced the a great variety of security forms and devices that prevailed under the prior laws, each of which has its own characteristics, such as pledge, chattel mortgage, conditional sales agreement, trust receipt and so on. This unitary approach is derived from the drafters' perception that all security interests perform an identical function and should be subject to an identical legal framework (Bridge, Macdonald, Simmonds, & Walsh, 1998-1999). …

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