Chapter 2 Credit 信用

Learning Objectives:

1.To learn the definition, features and functions of credit.

2.To understand credit risk and the ways to manage them.

3.To grasp various forms of credit, including commercial credit, bank credit, public credit,  consumer credit and private credit.

2.1 Overview of Credit 信用概述

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The Definition of Credit 信用的定义

Credit in economics refers to a behavior of borrowing and lending with the feature of repayment of the principal plus interests and is a special form of movement of value.

信用在经济学中是一种以还本付息为特征的借贷行为，是一种特殊的价值运动形式。   

Credit has four elements: 信用的要素

1)Credit relationship.

2)The object of credit.

3)Credit carrier.

4)Credit conditions.

The Features of Credit 信用的特点

1. Temporization 期限性

The separation of the ownership of funds or commodities from the right to use them is temporary. There is a certain duration of the separation.

The absence of duration means no separation of the ownership of funds or commodities from the right to use them, then there is no relationship of credit.

没有期限就意味着资金或商品的所有权与使用权没有分离，也就没有信用关系。

2. Repayment 偿还性

The temporary transfer of funds or commodities is conducted with repayment of funds or commodities as prerequisites. When creditors lend out funds or commodities, they require repayment of funds or commodities, when the relationship of credit ends.

资金或者商品的临时转移，以偿还资金或者商品为前提。当债权人借出资金或商品时，他们要求在信贷关系结束时偿还资金或商品。

3. Profitability 收益性

The relationship of credit is established on the basis of remuneration. Every economic entity has its own economic interest. So when creditors transfer the right to use funds or commodities, they require an added value to the funds or commodities lent out when repayment is made.

4. Risk 风险性

Credit is different from goods exchange as debtors get funds or commodities while creditors obtain the certificates of the ownership or creditors’ right. Whether or not the funds or commodities can be repaid or returned depends, to a large extent, on whether there is a sound legal system in the society, moral standard, as well as reputation and competence of debtors.

信用不同于商品交换，债务人获得资金或商品，债权人获得所有权凭证或债权凭证。

 The basic function of credit is to reallocate funds or it is a reallocation of funds in the form of borrowing and lending.

What’s more, credit also plays the role in providing and creating means of exchange and means of payment. All money, including notes and bank demand deposits, is composed of various debts, which somehow gain the position of being generally accepted. Notes, for example, can be regarded as the debt issued by a central bank and bank demand deposits as bank’s short-term debts.

Checkpoint:

How to manage or mitigate credit risk?

The Functions of Credit 信用的基本职能

The basic function of credit is to reallocate funds or it is a reallocation of funds in the form of borrowing and lending.

信用的基本职能是资金的再配置，或者是以借贷的形式对资金进行再配置。

What’s more, credit also plays the role in providing and creating means of exchange and means of payment. 

此外，信用也为提供和创造交换媒介与支付手段发挥了作用。

All money, including notes and bank demand deposits, is composed of various debts, which somehow gain the position of being generally accepted. Notes, for example, can be regarded as the debt issued by a central bank and bank demand deposits as bank’s short-term debts.