Functional Reform of the Chinese Law of Secured Transactions in Movables from a Comparative Perspective

The Chinese law of secured transactions concerning movables was reformed through a partial implementation of a functional approach. But by mixing formalism and functionalism, this functional reform, carried out first by the legislature through a codification and then by the Supreme People’s Court through a judicial interpretation, leads to a modular system with links between the various modules. Different modules are linked in the sense that the rules concerning property rights of security are extended to title-based security devices through the making of several “connection points”. After introducing the old law, this article focuses on issues of publicity, priority and enforcement under the new law. The functional reform establishes a unified notice-filing register for movables, which is accompanied by several specialist registers. Moreover, it provides a set of predictable priority rules that dispense with the factor of good faith in most circumstances. It also provides a flexible but complicated and somewhat uncertain system of enforcement and remedies for reservations of ownership and financial leases. In general, the new law is more modern and internationally oriented than the old law, but it still lacks systematic completeness and coherence and needs to be improved.