Why does China favor LC for its international trade?
From my experience of handling LC operations and frequent communications with Chinese traders,it is not difficult to find there are some considerations in Chinese traders minds in choosing LC as their mode of payment in international trade. The first and main consideration is to seek safety and protection as Chinese traders always know that the letter of credit is Bank s credit instead of merchant s. This concept is deeply rooted in their minds. Thus when they have a deal with a new client they usually favor LC. China is a nation well known for its great prudence. The second consideration is to obtain financing. A Chinese exporter with enough credit line in his bank may obtain financing by packing loan (a pre-loading short-term financing) against the letter of credit held in possession of the bank, export bill purchase against documents presented (better including full set of negotiable transport documents as mortgage, even under collection), discounting of the drafts accepted by issui
