New Blockchain Alliance for International Trade and Financing with Shanghai Authorities

Local Shanghai government has partnered up with financial institutions to establish an alliance in Shanghai’s E-port area to boost the use of blockchain for global trade.

At the China International Import Expo, which took place today on November 7th, the Shanghai Municipal Commission of Commerce, Shanghai Customs, and representatives of 6 bank branches in the city — including the People’s Bank of China and Bank of Communications — have collectively signed an E-port blockchain alliance.

According to the announcement, this new alliance aims to make use of blockchain technology to help the city with its international trade. Prior to this, Chinese President has taken a strong stance for the blockchain technology and urged the country to take the lead role in the industry.

Chen Huifang, professor at the College of Information Science and Electronic Engineering of Zheijiang University, noted that decentralized and distributed accounting features, that promotes information sharing, will ultimately facilitate international as it will help improve the efficiency of customs clearance as well as reduce the cost.

Ye Jian – an official from the General Administration of Customs of Shanghai –  noted that the alliance serves as another move under China’s vow to optimize ist business environment.

“This is the first blockchain application project in customs and the first service project for the CIIE. China upholds multilateral trade and constantly improves its business environment by seeking technological innovation,” said Ye.

Shen Weihua, deputy director of the Shanghai Municipal Commission of Commerce, explained that blockchain technology has already been applied to several business areas that are involved in Shanghai’s international trade, which include digital insurance, digital supply chain, Internet of Things (IoT), and intelligent manufacturing.

He further added that blockchain technology has been successfully implemented in the newly launched cross-border yuan trade financing services for Shanghai’s single window system. The application helped solve information imbalance issues during the process of trade financing.

According to him, the city’s “single window” services platform integrates to date 10 major functions, with 22 departments covering all regulations and major procedures in international trade.

Previous reports show that a pilot blockchain system was also trialed for cross-border financial services in Nanning, South China’s Guangxi Zhuang Autonomous Region, this October.

Qi Hong, vice director of China Construction Bank’s Shanghai branch, emphasized to reporters that the technology remains in its early experimental phase in the country, outlining that:

“We now use blockchain in sporadic financial products instead of the whole finance industry chain, and the public doesn’t have a sound understanding of the technology when it comes to financing. But I think the government’s call for blockchain construction will help push the technology’s application in a more comprehensive way.” 

Meanwhile, China’s President Xi Jinping has recently stated that the adoption of integrated blockchain technologies is pivotal to promoting tech innovation and industry transformation in the country. He urged the country to accelerate blockchain adoption and assume the role of leadership in the industry.

Several from the crypto industry speculated that it was the President’s speech that triggered the spike in the price of Bitcoin (BTC). Currently, The People’s Bank of China is working on launching the first official digital currency soon.

IBM and Maersk Test Blockchain Shipping Platform in Russia

A blockchain-based shipping platform built by IBM and Danish logistics giant Maersk is ready to officially launch in Russia. Russian authorities have signed an agreement with Maersk to launch blockchain shipping platform – TradeLens, according to a press release on June 6th.

The platform has been designed with the goal to facilitate international trade and as part of the agreement, the port in St. Petersburg will pilot the blockchain-powered logistics tool co-developed by Maersk’s tech subsidiary Maersk GTD and global tech giant IBM.

According to the press release, the agreement was signed on June 5th in the form of a Memorandum of Understanding (MoU) between Maersk CEO Søren Skou and Yuriy Tsvetkov, Deputy Minister of Transport of the Russian Federation and Head of the Federal Marine and River Transport Agency.

At the signing of the MoU last week, Yuriy Tsvetkov had noted:

“The main result of the implementation of TradeLens, according to our expectations, should be an increase in the transparency of the contracting procedure by distributing information about supply and demand, conditions and operations between many participants of the transport and logistics processes.”

Subsequently, the agreement facilitates the launch of TradeLens across all of Russia, aiming to replace the current paper-based shipping industry operations with blockchain-powered digital documentation.

The shipping platform will allow container logistics industry participants to share shipping transaction data, with member companies serving as nodes to support the blockchain system. Maersk has revealed that the TradeLens platform now includes over 100 participants and currently processes 10 million global shipping events each week.

The logistics giant stated that the project aims to facilitate interactions between shippers and regulatory and administrative entities in the country, ultimately increasing the speed of cargo clearance and movement of goods across borders.

Mike White, CEO and head of TradeLens for Maersk GTD claims that the platform will bring full transparency of cargo moves, whilst also enabling seamless, secure sharing of real-time actionable supply chain information to all involved participants.

Whilst TradeLens had been struggling to pick up major shipping collaborators, partly due to the way the venture was set up to favor the founding firms, changes in the business structure have lead to two major global shipping firms coming aboard in late May. The new additions are Mediterranean Shipping Company (MSC), the second largest after Maersk; and CMA-CGM, the fourth largest in terms of cargo carrying capacity.

Research by Bain & Company and World Economic Forum Shows Blockchain Could Narrow Trade Finance Gap

According to new research conducted by Bain & Company and the World Economic Forum, blockchain technology has the capability to eradicate the $1.5 trillion dollar supply-demand gap in global trade finance.

As the study indicates, the redistribution and expansion of ledger technology would result in companies being able to generate an extra $1 trillion in trade finance which might in any other case be overlooked.  Currently, data shows that the global trade finance holds at $1.5 trillion.  According to Asian Development Bank, by the end of 2025 it’s predicted to reach $2.4 trillion. The research points out that the gap in trade finance could be filled out by facilitating the financing of small and medium sized companies in emerging markets.

The study shows and explains how constrained and limited the access to credit score and loans is for small and medium sized companies, which are always looking to expand and grow their business. According to the research, the use of blockchain technology will reduce the financing gap by almost $1 trillion. Through blockchain, distributed net chains are able to share business reports over different financial institutions, which operate within the same supply chain. Moreover, this will increase a company’s credibility by being more transparent in their transactions. It will additionally help lower fees, mitigate credit risk and remove barriers of trade.

The biggest market that would benefit from using this blockchain system is, according to researchers, the Asian market, which it globally accounts for $105 billion (7 percent) of the trade finance gap. Asian economies are mostly using paper based transaction systems, specifically 75% of the global paper-primarily based transactions across supply chains.

Hong Kong and Mainland China have been reported already to be working together on developing a blockchain based system for companies to use, citing that it would help small and medium sized companies gain access to financial tools and funding more easily and consequently end fraudulent activities. According to news, a blockchain based finance platform, is being currently developed by the Chinese Central Bank and recently has entered the testing phase. The official launch date will soon follow.