According to reports from Chinese news portal 21jinji, the People’s Bank of China (PboC) has debuted a blockchain-based trade finance platform in the economic mecca of Shenzhen. The pilot program will include the Guangdong, Hong Kong, and Macau Bay regions, and is built on top of a blockchain architecture created by Ping An.
Dubbed the, “Guangdong, Hong Kong and Macao Dawan District Trade Finance Blockchain Platform”, it will be organized and promoted by the PBoC’s Central Bank Digital Currency Research Lab and the Central Bank Shenzhen Central Branch, according to the same report.
Ping An is an early adopter of blockchain-based trade finance technology. This is the latest demonstration of a platform that could slash the costs involved with trade finance in one of the world’s largest export markets. Blockchain is often associated with cryptocurrencies, but Ping An has also been successful in developing blockchain platforms that make trade finance more effective.
Ping An Appears to be a Leading Force in Blockchain Deployment
The report from 21jinji quoted Xu Honghui, who is the vice president of the transaction banking division at Ping An Bank. He commented on the cost savings that this new platform could create for industry,
“Previously, trade financing costs for micro- to medium-sized enterprises were about 7 percent to 8 percent, but the blockchain system could cut the cost to less than 6 percent.”
Many SME’s have long been shut out of the trade finance systems that larger companies have access to. The first phase of this new system’s launch is aimed at the challenges that smaller companies face when it comes to qualifying for trade finance, which blockchain could help clear up.
Hou Weirong, the general manager of China Merchants Bank’s transaction banking department commented on how blockchain could make a big difference for the industry as a whole,
“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. This can only be solved through financial technology.”
An Inclusive Solution
Ping An’s blockchain-based trade finance platform that is currently in used mainland China has demonstrated that blockchain can help reduce waste and graft in trade finance. The report from 21jingi points out that the new platform will help prevent a single account from being used to, “maliciously obtain,” multiple loans for the same transaction.
The new platform will also allow smaller business to add the information required to access trade finance. It will also create, “dynamic and real-time monitoring of various financial activities,” which will probably help both financial institutions and regulators achieve both compliance and a higher level of efficiency.
Blockchain Use in Global Trade Appears to be Growing
Earlier this year the Hong Kong Monetary Authority (HKMA) announced that it would be working with some of Asia’s largest banks to launch another trade finance platform that is also based on architecture that Ping An created. For now the platforms that are being tested seem to be limited to trade finance, though Ping An recently announced a comprehensive blockchain system for smart-cities.
As blockchain-based systems are more widely adopted, they could also become a universal solution for global logistics. A recent trial run administrated by Commonwealth Bank of Australia (CBA) of a blockchain-based tracking system was successful, and could be integrated with a trade finance platform that would increase oversight and ease of information sharing.
China has been all over the map in terms of its official state position on blockchain and cryptocurrencies, but it appears that blockchain is becoming a go-to solution for its immense logistics sector. With the rise of China as a global manufacturing force, it is worth watching how they choose to implement blockchain-based trade platforms both at home, and globally.