Page 27 - 2021 Policy Watch

not establish the right to reside. There are two ways The American Chamber of Commerce in South China
of establishing the right to reside: one is the right to
reside passed on by a will, based on the establishment 27
of a contract or a testament; and the other is the right
to reside based on a judgement, including “proper as-
sistance” in the event of divorce, division of heritage
in legal inheritance and transportation of enforcement,
etc. The right to reside at will requires a contract in
writing48 and the registration of the right to reside with
the registration authorities49. The right to reside cannot
be transferred or inherited, or be rented unless other-
wise agreed to by the parties50.

b. Collateral Right System

The Civil Code has made institutional innovations in
the collateral rights system, by expanding the scope of
collateral contracts, and specifying that collateral con-
tracts include mortgage contracts, pledges and other
contracts with collateral functions51, such as sales con-
tracts, financial lease contracts and factoring contracts,
respectively in Articles 641, 745 and 768 of the Civil
Code.

The Civil Code adds the right to use the sea area as a
mortgageable property52; however, it has not clarified
the problem of operations and management of a mort-
gage on such property.

The Civil Code amends the relevant regulations on a
“floating charge”, and determines that “creditors en-
joy a priority of compensation over movable property
when the mortgaged property is fixed”53 rather than
“priority of compensation when the right to mortgage
is fulfilled”54 as previously stated in the Law of Property
Rights. Combining the four conditions for determina-
tion of a floating charge on property in the Civil Code,
Article 41155 provides that creditors shall focus on the

48 Civil Code, Article 367
49 Civil Code, Article 368
50 Civil Code, Article 369
51 Civil Code, Article 388
52 Civil Code, Article 395
53 Civil Code, Article 396
54 Laws of Property Rights, Article 181
55 Civil Code, Article 411 provides “where mortgage is created in
accordance with Article 396 of this Code, the mortgaged property shall
be determined under any of the following circumstances: