The Accounts Receivable Pledge Registration System (hereinafter referred to as the registration system ), established by the Credit Reference Center of the People s Bank of China according to the Real Right Law, is a platform for real rights registration and announcement. The registration system was launched concurrently when the Real Right Law came into force on October 1, 2007, to provide real rights registration services for accounts receivable pledge across China. The registration of pledge with accounts receivable has the legal force of protecting the pledge right against the third party, and establishes the sequence of settlement of multiple claims on the same property.
In the past one year, over 1400 institutions signed up for the registration system from all over China, including policy banks, state-owned commercial banks, joint-stock commercial banks, foreign banks, city commercial banks, rural credit cooperatives, finance companies and other financial institutions, as well as guarantee companies, pawn companies, law firms and other institutions involved in financing activities of accounts receivable pledge.
In the past on year, the registration system processed over 30,000 registration requests and over 40,000 inquiries. Small- and medium-sized enterprises accounted for half of the pledgors among the total registrations.
The basic concepts of the building of the registration system draw on international experiences featuring efficiency, convenience and cost-effectiveness. Compared with traditional chattel pledge registration in China, the registration system has the following characteristics: first, it is an Internet-based centralized information system with a broad coverage, and can complete registration on any computer connected to the Internet.
Second, no pledge contracts are required for registration. Only information about the pledgee, pledgor and pledge is required for the purpose of announcing the pledge, while there is no need for parties concerned to disclose other commercially sensitive information irrelevant to the pledge. Third, the content of the registration is typed in by parties concerned, and the entity that initiates the registration is responsible for the authenticity, legality and accuracy of the content.
Fourth, with easy accessibility, the public can inquire into information of any registration in the country to get to know the claims of specific entities on pledged accounts receivable. All of these characteristics facilitate pledge registration, dramatically reducing financing transaction cost and protecting transaction safety.
The data in the registration system indicates that the accounts receivable pledge business has started across China, with Beijing, Shanghai, Jiangsu, Guangdong and Sichuan topping the list in the regional breakdown. With respect to the breakdown by institutions, the Agricultural Bank of China, China Construction Bank, Industrial and Commercial Bank of China, State Development Bank and Shenzhen Development Bank rank the top five.
Pledged accounts receivable include sales proceeds, the right to collect bridge toll or road toll, the right to collect rent of chattel or real property, and the proceeds from services provision such as engineering. The registration system supports the guarantee of pledge registration of accounts receivables with legal claims, imposes no limitation on the forms of guaranteed rights such as bank credit, commercial credit and corporate bonds.
At present, some corporate bonds have been registered with the registration system.
The Real Right Law allows accounts receivable to be pledged, and uses registration as a means of public announcement. It is possible that transfer and pledge coexist on the same account receivable. Then there is the problem of conflicting claims. As for the transfer of accounts receivable in factoring, the registration system defines a category of transactions for users to choose from. At the current stage, several users have registered transfer of accounts receivable in the registration system. A bank, as the assignee of an account receivable, can announce the transaction relationship of the transferred account receivable in the system so as to announce its claim on the account receivable, and prevent its counterparty from hiding the truth and re-pledging or re-transferring the receivable.
The Credit Reference Center of the PBC, as the institution that provides service for the registration of funding with accounts receivable, is not only responsible for maintaining the safe operations of the registration system, but also is committed to promoting the development of the accounts receivable funding business in China. In other countries, the funding with accounts receivable belongs to a special category of commercial loan products, with unique risk management techniques and credit regulatory requirements. The Credit Reference Center has organized some training courses for national banking financial institutions and local financial institutions on the basics of the accounts receivable funding business and on how to use the registration system, which have yielded good results. This type of training programs will be conducted on a broader basis in the future. At the same time, the PBC is communicating with other relevant authorities to improve the institutions related to accounts receivable funding on the basis of the Real Right Law.
In the past one year after the Real Right Law came into effect, it is a pleasure to see that the accounts receivable funding business has developed step by step in China. As a brand new credit product, in addition to improving financial innovation and competitiveness of financial institutions, accounts receivable funding can also help small- and medium-sized enterprises with a lack of real property collaterals to access bank loans, hence an important measure for small- and medium-sized enterprises to overcome financing difficulties. It is forecast that, with the improvement of the legal framework and the innovation of credit techniques used in financial institutions, accounts receivable funding is very promising in China.
