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MOFCOM Circular on Issues Related to Commercial Factoring Pilot Projects
Issued by: the Ministry of Commerce
Document No.: Shang Zi Han No. 419 of 2012
Date of Issue: June 27, 2012

To Tianjin Municipal Commission of Commerce and Shanghai Municipal Commission of Commerce

According to the spirits of the Opinions of the Ministry of Commerce, the Ministry of Finance, the People's Bank of China, China Banking Regulatory Commission and China Insurance Regulatory Commission on Speeding up the Smooth Development of Credit Sale (Shang Zhi Fa [2009] No. 88), the Opinions of the Ministry of Commerce on Further Speeding up the Construction of Credit in Business Field (Shang Zhi Fa [2009] No. 234), etc., it is agreed to carry out the commercial factoring pilot project in Binhai New Area, Tianjin and Pudong New Area, Shanghai, in order to actively explore new modes of optimization and utilization of foreign funds, to promote credit sale, to develop the credit service industry, to explore the development channels of commercial factoring, to better take advantage of active role of commercial factoring in export expansion and circulation promotion, to support the development of middle- and small-sized business enterprises. Now, it is hereby notified the issues related to commercial factoring pilot project:

I. Contents

To establish commercial factoring companies for providing enterprises with such services as trade financing, management of sales ledger, investigation and evaluation of clients’ credits, management and call of accounts payable and guarantee for credit risks.

II. Requirements

2.1 To set up work mechanism. The competent commercial authority in the pilot area shall be the competent department for commercial factoring industry. The competent authority shall strengthen communication and coordination separately with relevant departments of Tianjin and Shanghai People’s Governments and the People’s Governments of Binhai New Area and Pudong New Area, and set up work mechanism.

2.2 To strengthen access management. Each investor of each commercial factoring enterprise shall have relevant asset scale and fund strength to engage in factoring businesses and may not make investment in virtue of loans and other funds held in trust. Investors shall have sound governing structure and perfect internal control system against risk. Investors may not have any record on violation penalties recently.

An investor that applies for establishment of a commercial factoring enterprise shall have the registered capital suitable for its business scale, and have experience in operation and management of the factoring business and senior officers without bad credit records. The investor shall establish relevant management systems for engagement in factoring business, perfect relevant business flow and operation criterions and report to the competent authority on the business development at regular intervals.

2.3 To regulate operation activities. In order to engage in commercial factoring business, an independent company shall be established in principle. Each commercial factoring enterprise may not engage in mixed operation, nor conduct such financial activities as deposit taking and loan disbursement, nor engage in call business, whether specially or with entrustment, nor carry out the business of debt collection. Commercial factoring enterprises are encouraged to provide services to middle, small and micro-sized enterprises according to the Opinions of the State Council on Further Supporting the Sound Development of Small and Micro-sized Enterprises (Guo Fa [2012] No. 14) and to develop actively international and domestic factoring businesses.

2.4 To perfect regulatory systems. The competent commercial authority in the pilot area shall perfect the work mechanism to be in charge of formulating the administrative methods and guidance documents in connection with commercial factoring, set up day-to-day regulatory system to direct commercial factoring enterprises to actively carry out self-discipline, and report to the Ministry of Commerce on the conditions of pilot projects at regular intervals.

III. Arrangement

The competent commercial authority in the pilot area is expected to formulate implementing schemes on pilot project according to the aforesaid requirements and, within 15 working days, submit a written report to the Ministry of Commerce. If approved through review organized by the Ministry of Commerce, the schemes shall be implemented. In case of relevant questions during implementation of the pilot project, please contact with the Ministry of Commerce (Department of Foreign Investment Administration and Department of Market Supervision) in a timely way.

Ministry of Commerce of the People’s Republic of China
June 27, 2012

(Translated by 薛可)

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