2.2 The Forms of Credit  信用的形式

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Based on the subjects that provide credit, modern credit can be divided into commercial credit, bank credit, public credit, etc.

Commercial Credit 商业信用

It is the credit that is provided mutually between enterprises and is linked directly to exchange of goods.

它是企业之间相互提供并与货物交换直接有关的信用。

There are various types of commercial credit, such as sale of goods on credit, down-payment and payment of goods in advance, which fall into two main classes: sale of goods on credit and payment in advance.

1 Traits of commercial credit

1)Commercial credit is closely linked to a certain commodity transaction.

2)The creditor and debtor in commercial credit are either producers or managers of certain commodities.

3)The supply of and demand for commercial credit is in line with economic activities.

2 Limitations of commercial credit

1)The size of the credit is limited to the quantity of capital owned by a business, or is limited to the capital that can be put into production for the time being.

2)There are the constraints on the scope of commercial credit.

3)Commercial credit is confined to the direction of goods circulation.

4)Commercial credit is subject to time limit.

5)There are rules and regulations concerning managing commercial credit. 

Bank Credit 银行信用

In broad sense, bank credit is the credit that is granted by banks and other financial institutions.

In narrow sense bank credit only refers to the credit provided by banks.

1. Compared with commercial credit, bank credit has its own features.

1)Bank credit is granted in the form of money, the capital provided by banks is monetary income saved by all walks of life or monetary income drafting from cycling of industrial capital.

2)Bank credit is an intermediate credit，as banks and other financial institutions are intermediaries between the owners and users of monetary capital in credit activities.    

在信用活动中，银行和其他金融机构是货币资本所有者和使用者之间的中介，所以银行信用属于中介信用。

3)The trends of bank credit is different from those of the industrial capital in most stage of capital cycling except for prosperity.

4)Bank credit has the function of money creation.

Banks can not only place funds according to fund resources, but also create fund resources throgh their use of funds, i.e. creating money through granting loans. 

银行不仅可以根据资金来源进行资金运用，而且可以通过资金运用创造资金来源，即通过贷款创造货币。

2. Comparison between bank credit and commercial credit

1)Bank credit overcomes the limitations of commercial credit regarding the size, direction, and time of the credit.

银行信用克服了商业信用在规模、方向和信贷（信用）时间方面的局限性。

2)As enterprises that take in deposits and grant loans, bank can not only provide credit, but also create credit and then grant credit at low cost.

作为吸收存款、发放贷款的企业，银行不仅能提供信用，还可以创造信用并以低成本发放信用。

Public credit, also called fiscal credit is the credit that is extended to the public sector, which includes government units at all levels ranging from local and national to international.

In modern economy, public credit plays the following important roles:

1)It is used to make up the budgetary deficit as many countries often suffer from fiscal deficits.

2)It can be used to regulate economy and money supply.

Public Credit 国家信用

Public credit, also called fiscal credit is the credit that is extended to the public sector, which includes government units at all levels ranging from local and national to international.

In modern economy, public credit plays the following important roles:

1)It is used to make up the budgetary deficit as many countries often suffer from fiscal deficits.

2)It can be used to regulate economy and money supply.

Consumer Credit 消费信用

Consumer credit or consumption credit is the credit that businesses, banks and other financial institutions grant to consumers for meeting consumers’ demand for consumer goods. In consumer credit, debtors are consumers.

1 Forms of consumer credit

1)Consumer’s loan 

Based on loan payment schedules, consumer's loans can be divided into loans repyaed at maturity and loans on an installment plan. 

基于贷款偿还计划，消费贷款可以分为到期一次性偿还贷款与分期偿还贷款。

2)Credit card

2 Roles of consumer credit

1)Consumer credit can raise consumers’ current living standards both materially and culturally.

消费信用可以提升消费者现有的物质和文化生活水平。

2)Under the right conditions, consumer credit can be used to promote the production and sale of consumer goods, thereby further stimulate the economic growth.

3)Consumer credit can be used to facilitate the application of new technology, the sale and renewal of new products.

4)Consumer credit can be used to regulate market supply and demand.

3 Problems

When the increase of consumption exceeds the capacity of production, consumer credit will aggravate the tension of market supply and demand, therefore, push up price levels and cause serious inflation.

As for the individual consumers, abuse of consumer credit will result in heavy debts and potential predicament in the future.

Especially in recession, both demand for and supply of consumer credit will be reduced, which makes it even more difficult for producers to sell consumer goods. So it is hard for creditors to get back consumer’s loans. This will intensity the crisis in repayment of loans, and the economic conditions will take a turn for the worse.

Private credit is the credit granted mutually between individuals in the form of money or goods. Such kind of credit is mostly connected with underdeveloped or developing areas and countries, even in the remote areas in the developed countries.

Private Credit 民间信用

Private credit is the credit granted mutually between individuals in the form of money or goods. 

民间信用是个人之间以货币或商品形式相互提供的信用。

Such kind of credit is mostly connected with underdeveloped or developing areas and countries, even in the remote areas in the developed countries.

The features of private credit are as follows:

1)The subjects of private credit are individuals or individual organizations or common consumers of households and individuals who engage independently in production and sales of commodities.

2) Private credit adopts floating interest rates which is determined by market supply of and demand for funds. Interest rates for private credit are usually higher than those for bank credit.

3)Private credit is of high risk.

4)Private credit usually has short maturities and the size of it is also small.

Private credit is autonomous and blind, and this increases the difficulties for national government to control funds.

民间信用具有借贷时自发和盲目的特点，因此国家政府部门很难去控制资金。

Checkpoint:
Do you know the potential problems that consumer credit could bring to us?