The PBoC (People’s Bank of China) is backing a new blockchain-based trade and finance platform. The Central Bank Shenzhen Central Branch and Digital Currency Research Lab oversees and promotes the project.

The “Guangdong, Hong Kong and Macao Dawan District Trade Finance Blockchain Platform” is one of its kind. It aims to create a blockchain-based ecosystem to facilitate cross-border trading among the regions.

Financing for Micro- and Medium- Enterprises

Xu Honghui is the vice president of Ping An Bank’s transaction banking division. “Previously, trade financing costs for micro- to medium-sized enterprises were about 7 % to 8 %,” he said.

However, “the blockchain system could cut the cost to less than 6 %,” he continued.

Consequently, adding more data to the platform such as business and credit information, as well as third-party assessment data will result in a safer blockchain.

Moreover, the platform will connect and sync with the government logistics information and supervision systems. Furthermore, this will assist in controlling issues relating to data sharing and information asymmetry.

The Trade and Finance Pilot Project

This initial phase of the project will assist in supply chain financing. This stage will address and resolve the hurdles facing small and micro enterprises. Because these organizations are often not in possession of sufficient data to secure financing from institutions in a secure manner.

Hou Weirong, the general manager of the transaction banking department of the China Merchants Bank said,“Verifying the authenticity of trade background is an important part of business compliance. The information between banks is isolated […] to solve the problem of risk control, especially when it comes to receivables deduction [as well as] if there is a problem in the supply chain, the bank has no real-time information.”

The Blockchain Promotes Transparency

The platform will build upon the transparency and immutability of the blockchain. It will catalyze the construction of a regulatory system for trade finance. Such a system will achieve “dynamic and real-time monitoring of various financial activities.”

In addition, the platform can prevent the use of the same accounts to “maliciously obtain” multiple loans from various institutions.

 

 

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