The ownership retention system in the Civil Code of the People’ s Republic of China integrates both functionalist and formalist legislative approaches. Based on the distinction between the dual value structure of ownership and the ownership retention system, the Civil Code affirms that the ownership retention system maintains contractual freedom and transactional security, and recognizes the guarantee attributes of the owner- ship retention system. From an internal construction perspective, the guarantee attribute of this system is em- bedded within the sales contract, exceptionally breaking through the principle of contract interdependence and achieving the separation of ownership and possession, thereby integrating the needs of installment sales and credit transactions. Moreover, when examining the legal effect of ownership retention on third parties, the re- strictive conditions for the exercise of the right of reclamation, and the principles of liquidation, it is appropriate to adopt a security right interpretation for the ownership enjoyed by the seller. In terms of its external effects, the guarantee attribute of this system requires a narrow interpretation of the “ third party” that can be opposed, which should be directed at transactional entities that have an interest relationship with the seller but do not be- long to “ buyers in normal business activities” . At the same time, an unregistered seller may not oppose a trans- feree who has acquired the mortgage and pledge of chattels in good faith.