Recent developments in the law of secured transactions of movables under the new Chinese Civil Code

Abstract

In May 2020, the first Chinese Civil Code was enacted. This Civil Code incorporates several modifications of the law of secured transactions concerning corporeal movables and receivables. These modifications are made under the influence not only of international conventions, model laws, and legislative guides by the International Institute for the Unification of Private Law and the United Nations Commission on International Trade Law but also of overseas legislation, especially Article 9 of the Uniform Commercial Code. First, a semi-functional approach is taken by the Civil Code. The security agreement includes, in addition to typical security contracts, ‘other contracts having a function of security’. Consequently, the rules concerning the property right of charge (hypothec) are also applicable to reservation of ownership, financial lease, factoring, and other security interests, provided that there is no lex specialis. This leaves a larger space of autonomy for individual parties. Moreover, the new Civil Code intends to construct a more inclusive register by requiring reservation of ownership, financial lease, factoring, and other types of security rights to be registered to be effective against third parties. The future register for ordinary corporeal movables and claims will very possibly be a notice-filing system.