Xinhua Silk Road - Belt and Road Portal, China's silk road economic belt and 21st Century Maritime Silk Road Website Xinhua Silk Road - Belt and Road Portal, China's silk road economic belt and 21st Century Maritime Silk Road Website
Subscribe CustomBlackClose

Belt & Road Weekly Subscription Form

download_pop

Research ReportCustomBlackClose

The full edition of the report is available at Xinhua Silk Road Database. You can click the “Table of Content” to have a general understanding of it.

Click on the button below to create your account and get immediate access to thousands of articles.

Start a Free Trial

Xinhua Silk Road Database
News for Outlets

​China's petrochemical industry launches blockchain warehouse receipt financing trade

October 10, 2020


Abstract : China's petrochemical industry saw its first digital warehouse receipt pledge financing transaction that integrates blockchain and Internet of Things (IoT) technology successfully implemented on September 27, providing new solutions for small and medium-sized petrochemical enterprises perplexed by overly expensive and slow financing.

图片1.png

BEIJING, Oct. 10 (Xinhua) -- China's petrochemical industry saw its first digital warehouse receipt pledge financing transaction that integrates blockchain and Internet of Things (IoT) technology successfully implemented on September 27, providing new solutions for small and medium-sized petrochemical enterprises  perplexed by overly expensive and slow financing. 

This transaction has involved China's Sinochem Energy High-Tech Co., Ltd., China Construction Bank Inner Mongolia Branch, and Nanchu Management Group Co., Ltd. The financing party, Beijing Longrunkaida PEC Products Co., Ltd., is one of the largest traders in lubricant and base oil industries in northern China in terms of sales volume. From the application for issuance of warehouse receipts to the bank's appropriation of the loan, it took less than one day with a cost 40 percent lower than that of common trade finance services in the market.

Through Sinochem Energy's (Blockchain) Digital Warehouse Receipt Platform, we applied to Nanchu Management Group for the issuance of warehouse receipts with our stored base oil, said Ma Xiaohui, chief financial officer of Beijing Longrunkaida, adding that with the receipts, we submitted an online pledge application to China Construction Bank and received the loan in the afternoon.

-- Why financing is difficult and expensive for petrochemical SMEs

Presently, the continuous spread of global COVID-19 pandemic and the safety and environmental management upgrade are driving the operating costs of the entire industry up. Petrochemical companies are facing increasing financial pressures every day. However, for a long time, the traditional credit risk control system emphasizes on "reviewing the credit of the financing entity but not the goods", making it difficult for small enterprises with high value of movable assets to meet the credit granting conditions of financial institutions.

On one hand, it is difficult for financial institutions to track the transaction process of bulk commodities due to the lack of effective risk control measures, especially those of "controlling goods" which could lead to frequent risk issues like false warehouse receipts, unclear property in goods, repeated pledges, impairment or loss of collateral. Financial institutions have been affected so badly to tighten lending on warehouse financing.

On the other hand, since warehousing companies often fail to get updates on changes in goods property and pledge rights, disputes on goods property and warehouse receipt finance become commonplace. Unscrupulous enterprises would forge seals and issue false inventory certificates, delivery documents, etc. After being duped, the deceived company often sues the warehousing company as well, who hence have little choice but to quit issuing warehouse receipts and related business with financial supervision, but focus solely on warehousing business with limited income.

-- Blockchain digital warehouse receipts panacea for financing problems

Based on a deep understanding of the financial pain points of the petrochemical supply chain, Sinochem Energy has built a Blockchain Digital Warehouse Receipt Platform (hereafter as the Platform) which opens up third-party warehousing services, a key node of liquid logistics. The company not only conducts consistent research on digital warehouse receipt pledge and demonstrate the financing business model to China Construction Bank constantly, but continuously polishes products and operating plans. From the issuance of digital warehouse receipts by warehousing companies to pledges and loans, Sinochem Energy participates as a trusted technology provider and is highly recognized by China Construction Bank.

Transforming the traditional commodities in circulation into safe and efficient digital assets with good liquidity that can penetrate directly to the bottom layer, the Platform has shaped a credible asset system with Blockchain Digital Warehouse Receipts as a medium. 

"Compared with traditional print warehouse receipts, the Platform is the first to realize strict correspondence between digital warehouse receipts and stored goods. It uses IoT technology to monitor the goods under digital warehouse receipts closely, to ensure that each warehouse receipt directly assures the existence of goods," said Sun Liming, vice president of Sinochem Energy.

In addition, the platform realizes swift goods delivery, receipt pledge, as well as integration of "four flows" (the receipt flow, capital flow, contract flow, and goods flow), noted Sun, adding that  blockchain technology ensures that the recorded data cannot be tampered, which could guarantee the uniqueness and traceability of the data, and greatly improve the industry's credit rating.

-- Connecting financial institutions and industries to bolster real economy

On September 22, eight Chinese ministries or commissions including the People's Bank of China, the Ministry of Industry and Information Technology, issued the opinions on regulating the development of supply chain finance and supporting stable cycle ,optimization and upgrade of the industry chain of supply chain. It requires financial institutions and business entities to strengthen information sharing and collaboration, improve the digitalized level of supply chain financing settlements, standardize the development of supply chain inventories, warehouse receipts, and order financing, as well as strengthen the risk protection support for supply chain finance.

The Platform, which achieves the transparency in warehousing data, and dynamic monitoring on collateral quantity and value, etc., is highly consistent with the requirement listed in the opinions, said the relevant source in China Construction Bank.

In the future, China Construction Bank will expand its collaboration with Sinochem Energy to reduce financing difficulties, operating costs and capital costs for supply chain companies in an attempt to take practical actions to stimulate the quality and efficiency of the real economy, according to the source. 

It is understood that in the future, Sinochem Energy will work with China Construction Bank, China Association of Warehousing and Distribution, warehousing companies, commodity inspection agencies, goods owners, and Shanghai Petroleum and Natural Gas Exchange Co., Ltd. to jointly establish an ecosystem of digital warehouse financing, to consistently help financial institutions to improve loan risk control capabilities, petrochemical warehousing companies to obtain incremental income and SMEs to solve financing problems. Sino Energy will strive to further promote the optimization and upgrade of supply chains and related industrial chains. (Edited by Yang Yifan with Xinhua Silk Road, yangyifan@xinhua.org)

Scan the QR code and push it to your mobile phone

Keyword: China financing warehouse goods receipts

Write to Us belt & road login close

Do you want to be a contributor to Xinhua Silk Road and tell us your Belt & Road story? Send your articles to [email protected] and share your stories with more people.

Click on the button below to create your account and get im http://img.silkroad.news.cn/templates/silkroad/en2017te access to thousands of articles.

Start a Free Trial

Ask Us A Question belt & road login close

If you have any questions, please enter them in the box below.

Identifying code Reload

Write to Us belt & road login close

Do you want to be a contributor to Xinhua Silk Road and tell us your Belt & Road story? Send your articles to silkroadweekly@xinhua.org and share your stories with more people.

Click on the button below to create your account and get im http://img.silkroad.news.cn/templates/silkroad/en2017te access to thousands of articles.

Start a Free Trial