One of China’s largest chemical producers has launched a new Blockchain Warehouse Receipt Platform to help the industry combat the rising costs of operations and trade finance.
The increased demand for more environmental and safety measures in the wake of the pandemic has further increased costs in the Chinese petrochemical trade. Small businesses have already struggled to meet financial lenders’ lending requirements as a lack of effective risk control and difficulties in safely tracking the transaction processes of bulk commodities have led financial institutions to step up lending for inventory finance.
Key players in the Chinese petrochemical trade have now used blockchain technology to remove weaknesses in the logistics cycle and reduce the high financing costs and delays faced by many companies.
China’s first digital warehouse receipt financing transaction was completed on September 27 with a system that integrates blockchain with Internet of Things technology. The transaction included state-owned petrochemical giant Sinochem Energy High-Tech, China Construction Bank’s Inner Mongolia branch and Nanchu Management Group. The financing party is one of the largest distributors in North China in the lubricants and base oil industry, Beijing Longrunkaida PEC Products.
“It took less than a day from applying for warehouse receipts to being used by the bank, and the cost was 40% lower than traditional trade finance services on the market,” said Sinochem.
The system provides a solution to risks such as fraudulent warehouse receipts, forged shipping documents, unclear ownership of goods, repeated pledges, depreciation or loss of collateral – all of which often lead to frequent disputes over ownership of goods and funding of warehouse receipts.
Sun Liming, Vice President of Sinochem, explained how blockchain and IoT technology are being used to address these financial “weaknesses” in the petrochemical supply chain:
“The [blockchain] The platform is the first to implement strict correspondence between digital warehouse documents and stored goods. With the help of IoT technology, the goods under digital warehouse receipts are closely monitored to ensure that each warehouse receipt directly ensures the existence of goods. In addition, the platform realizes fast delivery of goods, receipt of receipt as well as the integration of “four flows” (receipt flow, capital flow, contract flow and goods flow). ”
Liming assumes that the high security of the tamper-proof blockchain technology and the improved traceability of data in the supply chain will “significantly improve the creditworthiness of the industry”.
The development and use of the new blockchain platform is in line with the requirements recently set by eight Chinese ministries and commissions, including the People’s Bank of China and the Ministry of Industry and Information Technology.
These ministries hired financial institutions and corporations to improve their data exchange, digitize billing to finance supply chains, and standardize inventory and warehouse receipts for supply chains. All of these measures are aimed at improving supply chain finance risk protection and reducing funding difficulties and operating and capital costs for supply chain companies.
A recent Cointelegraph report looked at China’s application of blockchain technology to digitize its infrastructure and promote secure data sharing with the aim of increasing efficiency and establishing better credit systems in various sectors including IoT, supply chain management and government services .