An Introduction to Factoring Law in China

Abstract

With the growth of international trade activities, the business volume of factoring in the Chinese market has shown a significant upward trend. Before the promulgation of the Chinese Civil Code in 2020, the factoring contract did not receive due attention, while its legal nature has sparked heated debate due to the complex legal relationships contained in its internal structure. However, the factoring contract is stipulated in the Contract Book as a new nominate contract in the Chinese Civil Code, which is a distinctly important milestone. The relevant provisions of the factoring contract are contained in Articles 761 to 769 of the Code, which have outlined a preliminary regulatory framework for factoring activities. However, controversies still exist in the legal interpretation and judicial practices related to factoring. This paper introduces the legislation and the related judicial practices of factoring with a detailed interpretation of the relevant articles in the Chinese Civil Code, which one could consider a remarkable example of the fusion of the Civil law and Common law systems Factoring contract, Chinese Civil Code, nominate contract, assignment of creditor’s claims, secured transaction, fabricated receivables, notification requirements, recourse factoring, non-recourse factoring, priorities of factoring