traders may evolve in the next few years. Today, the traders importing goods through
the railway corridors face problem in using letters of credit because of
non-negotiable consignment notes but in a few years, the traders may feel that
other types of trade finance such as trade credit
9 or supply chain finance (SCF)
through receivable financing supported by transferable instruments
10 would be more
suitable to support their trade when using the corridors. Therefore, the pertinent
question that arises is how can the Chongqing government promulgate and test laws
that can cater to all types of trade finance along the corridors? To engage in such a
discussion, it is instructive to first appreciate the legal framework of the BRI under
which the railway corridors are being created. It is also necessary to draw connections between the BRI and the Chongqing PFTZ that is being used as a testing
ground for adopting the laws necessary for information exchange in the railway
corridors. Since the context of the discussion is connected to the financing needs of
traders, it becomes essential to acknowledge the evolving nature of trade finance,
which over the years has been gradually shifting from intermediated trade finance to
trade credit. In financial literature, such shift is generally attributed to levels of
information asymmetry, which this chapter briefly adopts to create the context for
considering modern rules that may be promulgated and tested in the Chongqing
PFTZ. In the final discussion, testing of laws using the flexibility of the Chongqing
PFTZ is given centerstage with the spotlight shining on modern rules that may
facilitate the use of digital infrastructures such as electronic platforms, single
windows, blockchains, etc. along the railway corridors allowing for efficient trade
finance.
9 Trade credit as a form of trade finance is discussed below in Sect. 4 of the chapter.
10 Transferable instruments are financial instruments that may contain an unconditional promise to
pay a fixed amount of money to the holder of the instrument, or an order to a third party to pay the
holder of the instrument. Examples of transferable instruments include promissory notes, bills of
exchange, cheques, and certificates of deposit. They may also include chattel paper (e.g. retail
instalment sales contracts, promissory notes secured by an interest in personal property, and
equipment leases). Documents of title are documents which in the regular course of business or
financing are treated as adequately evidencing that the person in possession of such document is
entitled to receive, hold, and dispose of the document and the goods indicated therein (subject to any
defences to enforcement of the document). Examples of documents of title include certain transport
documents, bills of lading, dock warrants, dock receipts, warehouse receipts, or orders for the
delivery of goods. See “Legal issues relating to the use of electronic transferable records”, Working
Group IV (Electronic Commerce), Forty-fifth session (Vienna, 10–14 October 2011), (A/CN.9/
WG.IV/WP.115), para 3.
42
A. Basu Bal and T. Rajput
the railway corridors face problem in using letters of credit because of
non-negotiable consignment notes but in a few years, the traders may feel that
other types of trade finance such as trade credit
9 or supply chain finance (SCF)
through receivable financing supported by transferable instruments
10 would be more
suitable to support their trade when using the corridors. Therefore, the pertinent
question that arises is how can the Chongqing government promulgate and test laws
that can cater to all types of trade finance along the corridors? To engage in such a
discussion, it is instructive to first appreciate the legal framework of the BRI under
which the railway corridors are being created. It is also necessary to draw connections between the BRI and the Chongqing PFTZ that is being used as a testing
ground for adopting the laws necessary for information exchange in the railway
corridors. Since the context of the discussion is connected to the financing needs of
traders, it becomes essential to acknowledge the evolving nature of trade finance,
which over the years has been gradually shifting from intermediated trade finance to
trade credit. In financial literature, such shift is generally attributed to levels of
information asymmetry, which this chapter briefly adopts to create the context for
considering modern rules that may be promulgated and tested in the Chongqing
PFTZ. In the final discussion, testing of laws using the flexibility of the Chongqing
PFTZ is given centerstage with the spotlight shining on modern rules that may
facilitate the use of digital infrastructures such as electronic platforms, single
windows, blockchains, etc. along the railway corridors allowing for efficient trade
finance.
9 Trade credit as a form of trade finance is discussed below in Sect. 4 of the chapter.
10 Transferable instruments are financial instruments that may contain an unconditional promise to
pay a fixed amount of money to the holder of the instrument, or an order to a third party to pay the
holder of the instrument. Examples of transferable instruments include promissory notes, bills of
exchange, cheques, and certificates of deposit. They may also include chattel paper (e.g. retail
instalment sales contracts, promissory notes secured by an interest in personal property, and
equipment leases). Documents of title are documents which in the regular course of business or
financing are treated as adequately evidencing that the person in possession of such document is
entitled to receive, hold, and dispose of the document and the goods indicated therein (subject to any
defences to enforcement of the document). Examples of documents of title include certain transport
documents, bills of lading, dock warrants, dock receipts, warehouse receipts, or orders for the
delivery of goods. See “Legal issues relating to the use of electronic transferable records”, Working
Group IV (Electronic Commerce), Forty-fifth session (Vienna, 10–14 October 2011), (A/CN.9/
WG.IV/WP.115), para 3.
42
A. Basu Bal and T. Rajput