China utilizes blockchain to boost cross-border trade efficiency
China is actively embracing blockchain, the electronic ledger system that underpins cryptocurrencies, in order to improve administration and boost the effectiveness of global commerce.
On December 3, China applied blockchain technology to the entire process of international Intermodal for the first time, transporting goods from Chengdu, Sichuan to Vientiane, the capital of Laos. Intermodal refers to utilizing two or more methods of transportation for the movement of a single shipment.
International trade is greatly aided by the use of paper papers for things like shipping, customs, insurance, and other facets of global trade. However, because they must go through so many different organizations, such as clients, trains, banks, and customs, there is a chance that they will be misplaced or lost. To make matters worse, using paper forms slows down information flow.
That's why Chengdu wants to utilize blockchain technology to build a guaranteed and trustworthy channel for the flow of information.
Blockchain enables total data visibility and a single source of truth by enabling all parties participating in international trade to record modifications to a single shared ledger. Businesses may also access the status and location of items at any time because transactions are constantly time-stamped and up-to-date.
"Blockchain technology can solve the mistrust issues, thanks to its decentralization, non-tampering, and traceability features," the digital finance unit of China Railway Chengdu Branch, said, adding that the information of all parties, including importers, exporters, freight forwarding agents, customs, etc., is open and transparent on the chain.
The chain's data may also be used by businesses to build quicker routes and eliminate pointless delivery stages, thereby increasing the effectiveness of the overall transportation process.
In the application of blockchain technology in global trade, the Chengdu branch is a pioneer. In August 2019, it unveiled a blockchain-based platform that enables the upload of all waybill information related to the China-Europe Express. The route, which officially opened in 2018, currently acts as a vital export channel for Chinese goods to Europe.
Aided in part by blockchain-enabling measures, cargo trains between China and Europe have picked up speed in recent years. Statistics showed that it took three years and three months for the freight trains to make 200 trips, but only two months to increase from 800 to 1,000 trips.
As more data is recorded on the platform, it can also be used by foreign trade companies to obtain more credit. In April, Chengdu, with the help of the Industrial and Commercial Bank of China (ICBC), launched China-Europe Trade Link 2.0, a new version of the blockchain-powered platform.
Instead of focusing on enterprises' assets, banks can track their business flow, capital flows, and logistics to determine whether or not to grant a loan. It helps foreign trade enterprises get financing directly from banks, reduces costs and speeds up their cash flows.
The China Merchants Group, a state-owned conglomerate that engages in trade, transportation, finance, and property businesses, also deploys blockchain technology to manage its ports, in order to raise the efficiency of cross-border trade.
Using the blockchain technology provided by Tencent Cloud, it has developed a logistics alliance chain that promotes open and timely data exchange between all participants. Because of this, the group said its cross-border trade logistics efficiency has increased by 60% while costs have decreased by 50%.
"The advanced stage of the supply chain is to enable business and capital flows to be credibly and efficiently run, and blockchain will be the ultimate solution," Zhang Jian, chief digital officer of China Merchants Group, told press in September this year.
Since the outbreak of the COVID-19 pandemic, cross-border trade has taken a heavy hit by widespread sourcing disruptions. While snags in the global supply chain are inevitable, wider adoption of blockchain technology may make dealing with those issues easier.
Writer: Rebbeca Ren
Editor: Boyuan Wang
Photo by CHUTTERSNAP on Unsplash