This provision is incompatible with contemporary security interests

because, as just noted, they do not require that the obligor-debtor be the
owner or even to hold title to the collateral to be able to create an
enforceable security interest in it.256 For at the

740

root, the security rights that the PRL wanted to define are not propriety but
possessory in nature, as we discussed earlier with respect to “rights in the
property of others” (the iura in re aliena of Roman law). The last sentence
of Article 40 is similarly troubling. Assume, for example, that the obligor in
a security right transaction is farmer “F” who relies on the crops he has
grown in land he has rented but whose ownership belongs to the PRC or to
a collective farm “CF”. If farmer F cannot repay the loan to Bank “A” this
provision subordinates A’s repossession or foreclosure on F’s crops, unless
the PRC or CF authorize it.
Professor Ronald C.C. Cuming of the University of Saskatchewan and
one of the world’s experts on secured transactions law noted additional
concerns in a recent communication to this writer.257 Of these concerns, I
have selected a few to illustrate the magnitude of the law and practice
reform task that awaits Chinese and foreign secured transactions experts:
(1) The failure of the PRL security right to follow the principle of its
“conceptual unity.” Under pre-existing as well as under the PRL, security
rights can only be acquired on the basis of two statutory categories: The
generic (real property and chattel) mortgage and the pledge. Other security
agreements such as found in financial leases and title retention or
conditional sale agreements are not included and are left to be governed by
the Contract Law.258 (2) The secured rights of the PRL do not extend to
proceeds or to those assets received by the debtor as a consequence of the
sale or exchange of collateral.259 As should be readily apparent, the right to
proceeds is crucial in both inventory and accounts receivable financing. (3)
The PRL does not properly distinguish between the creation or
“attachment” of the security interest (which takes place between the secured
lender and his debtor and without the need of a filing) and the perfection
and priority of the secured right, which requires filing or possession of the
collateral by the secured creditor. As noted by Professor Cuming, the term