Meaning
Special security classification embedded within the movable property financing framework of the Civil Code to protect vendors and lenders who finance the acquisition of specific physical assets. Defined under article 416, a purchase money security interest grants the provider of acquisition funds super-priority status over pre-existing general encumbrances covering the debtor property. The security right applies strictly to the equipment or goods acquired with the credit provided, establishing a direct causal connection between funding and asset acquisition.
Registration on the central credit publicity system within ten days of physical delivery secures top-tier ranking against competing floating mortgages granted by the buyer. Failure to meet the statutory ten-day registration timeline strips away super-priority, relegating the security right to general registration priority rules.
Priority Exception
Super-priority status overrides the standard first-in-time filing rule that governs general movable financing under Chinese law. Where an enterprise has granted a floating mortgage over all present and future machinery to a bank, a vendor utilizing a purchase money security interest takes senior priority over that specific new machine if registered within ten days of delivery. Foreign equipment vendors selling industrial production lines into China rely on this statutory protection to secure deferred payment structures without seeking consent from the buyer existing primary lenders.
The super-priority applies strictly up to the outstanding purchase price of the delivered equipment.
Evidentiary Requirement
Rigorous documentation must demonstrate that credit funds directly enabled the purchase and delivery of the collateralized asset. Procurement contracts, loan disbursement records, bank wire transfers and customs import documentation are examined by execution courts to verify the direct linkage required for a purchase money security interest. Mixed credit facilities covering operating expenses alongside asset purchases fail to qualify for super-priority status unless funding allocations are strictly segregated.
Claim Priority
Competing claims between multiple purchase money creditors over the same asset are resolved through standard chronological registration timestamps on the central registry platform. Court distribution plans treat timely registered acquisition financiers equally, distributing auction proceeds according to filing sequence.
