One of the largest Chinese chemical manufacturers has launched a new Blockchain warehouse receipt platform to help the industry fight growing operations and trade finance.
The growing demand for additional environmental safety measures in the midst of the pandemic has led to an increase in spending on petrochemical trade in China. Small businesses are already struggling to meet terms of lending to financial lenders, as the lack of effective risk controls and the difficulty of reliably tracking wholesale commodity handling have forced financial institutions to tighten lending to stocks.
Major players in the Chinese petrochemical trade are currently using blockchain technology to address bottlenecks in the logistics cycle and reduce the high financial costs and delays faced by many companies.
On September 27, the ongoing digital receipt financing deal in China was completed using a system combining blockchain and Internet of Things technology. The deal involved the state-owned petrochemical giant Sinochem Energy High-Tech, Inner Mongolia of China Construction Bank and Nanchu Management Group. The funder is one of the largest traders in North China in the field of lubricants and base oils, Beijing Longrunkaida PEC Products.
“It took less than a day from applying for inventory income to making a bank loan at a cost that was 40% lower than traditional commercial financial services in the market,” says Sinochem.
The system offers a solution to risks such as fake sales receipts, fraudulent shipping documents, unclear ownership of the merchandise, repeated promises, poor or lost security – all of which often leads to recurring disputes over ownership of goods and financing of warehouse receipts.
Sinochem Vice President Sun Leaming explained how blockchain technology and IoT are being used to address these economic pain points in the petrochemical supply chain:
“The [Blockchain] platform is the first to implement strict correspondence between digital inventory receipts and stored goods. It uses Internet of Things technology to closely track goods against digital warehouse receipts to ensure that each warehouse receipt directly guarantees the availability of goods. In addition, the platform implements a fast delivery. For merchandise, a promise of receipt, and merging “four flows” (inbound flow, capital flow, contract flow, and merchandise flow).
Leaming predicts that higher blockchain security, tamper resistance, and improved data traceability in the supply chain “will improve the credit rating of the industry”.
The development and use of the new blockchain platform meets the requirements recently set by eight Chinese ministries and committees, including the People’s Bank of China and the Ministry of Industry and Information Technology.
These ministries are mandated to improve data sharing, digitize supply chain finance accounts, and standardize supply chain inventory and inventory revenues for financial institutions and companies. All of these measures aim to improve protection from risks in supply chain finance and reduce financial hardship and operational and capital costs for supply chain firms.
A recent report by Cointelegraph has deepened the use of blockchain technology in China to digitize its infrastructure and encourage secure sharing of data to improve efficiency and build better credit systems across sectors including the Internet of Things, supply chain management and public services.