A.

The PRL’s Generic Mortgage

Chapters 16 and 17 (on mortgages and pledges) of the PRL deal with a
form of lending that could help at least in theory to develop internal markets
for goods and services; they comprise the law of secured transactions in
movable property. Properly drafted and implemented, this law can make it
possible to provide credit for micro, small and medium-sized businesses at
reasonable rates of interest. Thus, “asset based lending” or secured
transactions law has contributed to the reduction of poverty in developing
as well as in developed countries.247 And according to the People’s Bank of
China (CRC): “One of the constraints to SME [small and medium
enterprise] financing in China was the underdeveloped secured transactions
system … There used to be a

738

law (China Security Law) but it focuses mainly on … immovable

collaterals (sic) and does not provide effective secured transactions options
for SMEs.”248
The preceding assertion by the CRC does not mention the “Chinese
generic mortgage” (Di Ya, 抵 押 ) which as its Roman law ancestor249
encompasses both immovable as well movable property and which does not
require a transfer of title or possession to the secured creditor.250 One can
only speculate that this mortgage does not have the business importance
that the PRL has assigned to its pledge even though in principle, the generic
mortgage is, as will be discussed shortly, more adaptable to contemporary
asset based lending than is the pledge.
As just noted, Chinese commentators distinguish the Di-Ya regulated by
Chapter XVI of the PRL from the common law mortgage in that it does not
involve a transfer of title from the mortgagor to the mortgagee and suggest
that it is “in substance similar to a common law legal fixed charge, whereby
a mortgagor grants a security that attaches to the secured property but does
not require [a] transference of title or possession of the asset.”251 They add
that “[s]hould the mortgagor default in repayment of the secured sum, the
mortgagee is entitled to convert the secured property into money to satisfy
the debt. Further, a properly registered mortgage will have priority over any