How China is shaping innovation in supply chain finance


China’s leading role in shaping the use of technology in supply chain finance is explored in a new research report from the SCF Academy.

There are few places in the world where the digital revolution has been more apparent and faster than in China. The adoption of technology in day-to-day life as well as in the financial sector has been rapid and widespread, with the country recognised as the world’s largest e-commerce market and its population being one of the biggest users of mobile payment services, according to consultancy McKinsey.

Within the world of supply chain finance (SCF), China is often ahead of Europe with companies and banks already implementing blockchain-based deep-tier financing solutions as well as using artificial intelligence (AI) technology.

As Luca Gelsomino, academic director at the SCF Community says in the report: “While we argue about financing the second tier of suppliers or pre-shipment orders, China is rapidly setting the new benchmarks for SCF.”

Yet the country has its challenges, with the report examining some of the major bottlenecks in financing for SCF. Despite strong government support for the product, some traditional commercial banks are still wary of offering the product, the report finds.

Access has been particularly limited among small and medium-sized companies, the report says, though adding that the government has been ramping up efforts to improve SCF availability for smaller firms over the last year.

Coupled with state-backed efforts, developments with ‘industrial internet’ technology – an umbrella term that includes cloud computing, big data and artificial intelligence – have been a driving force behind innovation in SCF, according to the report. Last year, China’s Central Bank lent its support to trials of blockchain-based solutions aimed at providing trade and supply chain finance to SMEs.

The SCF Academy research features examples of how this latest blockchain and AI technology has been used to support the financing of supply chains in China.

JDH Fintech set up its JDH SCF platform which supports the financing of deep-tier suppliers based on blockchain technology. By the end of 2018, a total of 12,076 companies were registered on the platform, of which more than 9,000 were SMEs.

China Merchants Bank set up a platform in collaboration with China Construction E-Commerce Co that supports the financing and procurement processes for China’s construction industry. The platform offers electronic bidding, online transactions and SCF. It uses blockchain technology and artificial intelligence to help verify supplier information.

Linklogis Digital Technology Group has developed various platforms that harness blockchain technology with AI to finance suppliers beyond the first tier and into the ‘nth’

Despite promising advancements in technology, the research concludes that there is still much work to be done in the application of AI and big data. The volume of business data available is still limited compared to the volume of consumer data in China. The availability of data also varies from industry to industry. The report also tackles the lack of legislation around the use of sharing data and raises the problem of a lack of technical experts working in this emerging area of financial technology.

The new Supply Chain Finance in China report is written by Professor Song from Renmin University, Yujiang Cai, CEO and Shuchuan Xu, senior research analyst of 10000Links, and it is available to read in full here.

Source: SCF Briefing

To find out more about supply chain finance industry, please join us at BCR's Supply Chain Finance Summit, which will take place in Amsterdam, on 30th-31st of January 2020.